37 Federal Mortgage-Related Laws Practice Questions & Answers

1. 1. A title company gives an MLO a $75 gift card for each closed loan the MLO refers to it. Both parties argue no cash changed hands and the amount is small. Under RESPA, this arrangement is:

   • A.A prohibited kickback, because a thing of value was given for the referral of settlement service business✓ Answer
   • B.Permitted, because non-cash items worth less than $100 fall outside what Section 8 counts as a thing of value
   • C.Permitted, so long as the gift card program is disclosed to the borrower on the Closing Disclosure
   • D.Not a RESPA violation, because the title company is not the creditor and Section 8 reaches only lenders

   RESPA Section 8(a) bars giving or accepting any fee, kickback, or 'thing of value' pursuant to an agreement or understanding that business incident to a real estate settlement service be referred. 'Thing of value' is defined broadly and expressly reaches gifts, merchandise, trips, and similar non-cash items, so a gift card is no safer than cash. There is no de minimis exception and disclosure does not cure a Section 8 violation — only payment for goods actually furnished or services actually performed is permitted.

   Source: RESPA Section 8(a); 12 CFR 1024.14(b), (d) ('thing of value')Report a problem with this question

2. 2. A mortgage brokerage refers borrowers to a title agency in which the brokerage's owner holds a 40% interest. Which set of conditions must be satisfied for this affiliated business arrangement to fall within RESPA's exception?

   • A.Written disclosure of the affiliation within three business days after the referral occurs and a referral fee split that does not exceed 50% of the total settlement charge
   • B.Written disclosure of the relationship at or before the referral, no required use of the affiliate, and the only return is a return on the ownership interest✓ Answer
   • C.Disclosure of the relationship on the Closing Disclosure plus the consumer's separate written consent to use the affiliate, obtained at consummation
   • D.Prior approval of the arrangement by the state regulator and annual disclosure of the owner's exact percentage interest directly to the CFPB

   RESPA's affiliated business arrangement exception is conditional: the referring party must give a written ABA disclosure at or before the time of referral describing the relationship and estimated charges, must not require the consumer to use the affiliate (aside from narrow exceptions such as attorney or lender selection of its own representative), and may receive nothing beyond a return on its ownership interest. Fee splits or 'thank you' payments outside a bona fide ownership return remain prohibited even when the affiliation is disclosed.

   Source: RESPA Section 8(c)(4); 12 CFR 1024.15(b) and Appendix DReport a problem with this question

3. 3. In a residential purchase transaction, the seller conditions acceptance of the buyer's offer on the buyer purchasing title insurance from a title company the seller names. Which statement is correct?

   • A.This is permitted so long as the seller, rather than the buyer, pays the entire premium for the owner's title insurance policy
   • B.This is permitted if the designated title company's rates are competitive with those of other title companies in the market
   • C.This violates RESPA Section 9, and the seller is liable to the buyer for three times all charges made for the title insurance✓ Answer
   • D.This violates RESPA Section 8, and the seller's exposure is limited to refunding the title insurance premium the buyer actually paid

   RESPA Section 9 prohibits a seller from requiring, directly or indirectly, that the buyer purchase title insurance from any particular title company as a condition of sale. The remedy written into the statute is treble damages — the seller is liable to the buyer for three times all charges made for the title insurance — which is why the violation is costly regardless of whether the named company's pricing is reasonable.

   Source: RESPA Section 9; 12 CFR 1024.16Report a problem with this question

4. 4. Under RESPA's escrow account rules, the servicer must deliver the initial escrow account statement at settlement or, if not delivered then, within:

   • A.60 calendar days of the first payment due date
   • B.30 calendar days of settlement
   • C.45 business days of settlement
   • D.45 calendar days of settlement✓ Answer

   Regulation X requires the initial escrow account statement at settlement or within 45 CALENDAR days of settlement — the rule is written in calendar days, not business days, and many circulating study decks state this incorrectly. The same section caps the cushion at one-sixth of the estimated annual disbursements and requires an annual escrow statement within 30 days of the end of the computation year.

   Source: 12 CFR 1024.17(g) (initial escrow account statement)Report a problem with this question

5. 5. A borrower's loan servicing is being transferred to a new servicer. Which combination of RESPA servicing-transfer requirements is correct?

   • A.Notice from either servicer at any point within 30 days after the transfer takes effect, and a 90-day grace period during which payments misdirected to the old servicer must be forwarded free of charge
   • B.Transferee notice at least 15 days before the effective date, transferor notice within 15 days after, and a 15-day grace period for payments the borrower sends to the wrong servicer by mistake
   • C.Transferor notice at least 30 days before the effective date, transferee notice at consummation of the transfer, and a 30-day period during which no late fee of any kind may be imposed on the loan
   • D.Transferor notice at least 15 days before the effective date, transferee notice within 15 days after, and a 60-day period during which a payment sent to the old servicer cannot trigger a late fee✓ Answer

   RESPA Section 6 requires the transferring servicer to notify the borrower at least 15 days before the effective transfer date and the new servicer to notify within 15 days after it. To protect borrowers from confusion during the handoff, a payment received by the old servicer during the 60-day period beginning on the transfer date may not be treated as late for purposes of a late fee or an adverse credit report.

   Source: RESPA Section 6; 12 CFR 1024.33(b) and 1024.33(c)(1)Report a problem with this question

6. 6. A borrower sends the servicer a written notice asserting that a payment was misapplied. Under Regulation X's error resolution procedures, the servicer must:

   • A.Respond in writing within 30 calendar days of the notice, with no separate acknowledgment required because the response serves that purpose
   • B.Acknowledge receipt within 5 calendar days and respond within 45 calendar days, with no extension available once an investigation begins
   • C.Acknowledge the notice within 5 business days and respond within 30 business days, with one permitted 15-business-day extension✓ Answer
   • D.Acknowledge receipt within 20 business days and respond within 60 business days, with one permitted extension of 15 additional business days

   Regulation X's notice of error framework gives the servicer 5 business days to acknowledge receipt in writing and 30 business days to investigate and respond, either correcting the error or explaining why no error occurred. The servicer may extend the response period once by 15 business days with notice to the borrower, and the same timeline governs a request for information.

   Source: 12 CFR 1024.35(d), (e)(3) (notice of error); 12 CFR 1024.36Report a problem with this question

7. 7. Under TRID, which of the following, taken together, constitute an 'application' that starts the Loan Estimate clock?

   • A.Name, income, Social Security number, property address, estimated property value, and loan amount sought✓ Answer
   • B.Name, income, Social Security number, property address, estimated value, loan amount, and any other information the creditor deems necessary
   • C.A signed Uniform Residential Loan Application together with the credit report fee
   • D.Name, income, credit score, property address, purchase price, and down payment

   TRID defines an application as exactly six pieces of information: the consumer's name, income, Social Security number to obtain a credit report, the property address, an estimate of the property's value, and the mortgage loan amount sought. The former seventh catch-all — 'any other information the creditor deems necessary' — was eliminated, so a creditor cannot delay the Loan Estimate by claiming it still needs additional items.

   Source: 12 CFR 1026.2(a)(3)(ii) (definition of application for 1026.19(e)/(f))Report a problem with this question

8. 8. A consumer submits a complete application on Monday. Consummation is scheduled soon. Which pair of TRID deadlines applies to the Loan Estimate?

   • A.Delivered or placed in the mail no later than 3 business days after application and received no later than 7 business days before consummation✓ Answer
   • B.Delivered or placed in the mail no later than 7 business days after application and received no later than 3 business days before consummation
   • C.Delivered or placed in the mail no later than 3 business days after application and received no later than 3 business days before consummation
   • D.Delivered at or before consummation with no minimum waiting period, because the Closing Disclosure controls the final terms

   The governing rule is 3-day delivery plus a 7-business-day wait before consummation. The Loan Estimate must be delivered or placed in the mail within 3 business days of receiving the six-item application, and consummation may not occur until the 7th business day after the LE is delivered or mailed. The 3-business-day rule before consummation belongs to the Closing Disclosure, not the Loan Estimate.

   Source: 12 CFR 1026.19(e)(1)(iii) and 1026.19(e)(1)(iii)(B) (7-business-day wait)Report a problem with this question

9. 9. Which change occurring after the consumer has received the Closing Disclosure requires the creditor to provide a corrected disclosure AND a new three-business-day waiting period?

   • A.The loan product changes from a fixed rate to an adjustable rate✓ Answer
   • B.The seller agrees to pay an additional $500 toward closing costs
   • C.The recording fee increases by $85
   • D.The borrower's homeowner's insurance premium comes in higher than estimated

   Only three changes restart the three-business-day waiting period: the disclosed APR becomes inaccurate, the loan product changes, or a prepayment penalty is added. Switching from a fixed rate to an ARM is a product change, so a corrected Closing Disclosure and a fresh three-business-day wait are required. All other changes require a corrected disclosure at or before consummation but no new waiting period.

   Source: 12 CFR 1026.19(f)(2)(ii) (changes before consummation requiring a new waiting period)Report a problem with this question

10. 10. Under TRID's good-faith 'variation' rules, which charge falls into the ZERO tolerance category?

    • A.A recording fee
    • B.A transfer tax✓ Answer
    • C.Prepaid interest
    • D.The premium for hazard insurance the consumer selects

    Transfer taxes sit in the zero tolerance bucket along with creditor and broker fees, fees paid to a creditor affiliate, and fees for services the consumer cannot shop for — these amounts may not increase at all from the Loan Estimate. Recording fees and services shopped from the creditor's written provider list are subject to the 10% cumulative bucket, while prepaid interest, property insurance premiums, and escrow deposits may vary without a numeric limit so long as the estimate was made in good faith.

    Source: 12 CFR 1026.19(e)(3)(i)-(iii) (good faith determination and tolerance categories)Report a problem with this question

11. 11. A creditor discovers 20 days after consummation that it exceeded the 10% cumulative tolerance. To cure the violation, the creditor must refund the excess and deliver a corrected Closing Disclosure no later than:

    • A.3 business days after discovering the error
    • B.60 calendar days after consummation✓ Answer
    • C.30 calendar days after consummation
    • D.At the next annual escrow analysis

    Regulation Z allows a creditor to cure a tolerance violation by refunding the excess to the consumer and delivering a corrected Closing Disclosure within 60 calendar days after consummation. That is distinct from the 30-calendar-day window for correcting non-numerical clerical errors or events occurring after consummation that make the disclosure inaccurate.

    Source: 12 CFR 1026.19(f)(2)(v) (refunds related to the good faith analysis)Report a problem with this question

12. 12. Which of the following transactions carries a right of rescission under Regulation Z?

    • A.A loan to an LLC secured by a four-unit rental building
    • B.A purchase-money first mortgage on the borrower's principal residence
    • C.A refinance of a vacation home the borrower occupies two months a year
    • D.A cash-out refinance with a new lender secured by the borrower's principal residence✓ Answer

    The right of rescission attaches when a non-purchase-money lien is placed on the consumer's principal dwelling, so a cash-out refinance with a new creditor is rescindable. Purchase-money loans are expressly exempt, second homes and investment properties are not principal dwellings, and credit extended to a legal entity such as an LLC is outside Regulation Z's consumer-credit coverage entirely.

    Source: 12 CFR 1026.23(a), (f) (right of rescission and exempt transactions); 12 CFR 1026.3(a)Report a problem with this question

13. 13. For purposes of counting the three-day rescission period, which day is NOT counted as a business day?

    • A.Sunday✓ Answer
    • B.Saturday
    • C.A Monday when the creditor's office is closed for staff training
    • D.The day the consumer signs the note

    For rescission, the seven-business-day Loan Estimate wait, and the three-business-day Closing Disclosure receipt rule, Regulation Z uses the 'precise' definition: all calendar days except Sundays and the ten federal legal public holidays. Saturdays therefore count, and whether the individual creditor's office happens to be open is irrelevant under this definition — that open-for-business test applies only to the general definition used for the three-day Loan Estimate delivery deadline.

    Source: 12 CFR 1026.2(a)(6) (definition of business day); 12 CFR 1026.23(a)(3)Report a problem with this question

14. 14. A borrower refinanced her principal residence but was never given the required notice of the right to rescind. What is the effect on her rescission rights, and what must the creditor do once she rescinds?

    • A.The rescission period becomes unlimited for as long as she owns the home, and the creditor must return her money and release the security interest within 60 calendar days of her notice
    • B.The rescission period extends to one year from consummation, and the creditor must return any money received and release the security interest within 30 calendar days of her notice
    • C.The rescission right is extinguished once the loan closes, but the borrower may recover statutory damages plus attorney's fees for the creditor's failure to give the notice
    • D.The rescission period extends to three years from consummation, and within 20 calendar days of receiving the notice of rescission the creditor must return money and release the security interest✓ Answer

    If the creditor fails to deliver the rescission notice or the material disclosures, the three-business-day period expands to three years from consummation (or until the property is sold or transferred, whichever comes first). Once the consumer rescinds, Regulation Z gives the creditor 20 calendar days to return any money or property received and to take the action necessary to terminate the security interest.

    Source: 12 CFR 1026.23(a)(3) and 1026.23(d)(2)Report a problem with this question

15. 15. Which of the following fees is NOT included in the finance charge on a mortgage loan?

    • A.The private mortgage insurance premium
    • B.Discount points paid by the borrower to reduce the rate
    • C.Per-diem interest collected at closing
    • D.The title insurance premium and closing agent fee✓ Answer

    The finance charge is the cost of consumer credit as a dollar amount, so it captures charges imposed by the creditor as an incident to the extension of credit — discount points, prepaid interest, and mortgage insurance premiums all qualify. Title insurance, title/closing agent fees, appraisals, credit reports, surveys, and recording fees are excluded as bona fide third-party real-estate closing costs, which is why they do not raise the APR.

    Source: 12 CFR 1026.4(a), (c)(7) (real-estate related fees excluded from the finance charge)Report a problem with this question

16. 16. A radio ad for a fixed-rate mortgage states: 'Own a home for just $1,450 a month!' Under Regulation Z's advertising rules, this ad must also disclose:

    • A.The interest rate, the total of payments, and the amount financed, stated before the payment amount
    • B.The amount or percentage of the down payment, the terms of repayment, and the annual percentage rate✓ Answer
    • C.Only the annual percentage rate, because the APR alone captures the full cost of the credit
    • D.The lender's NMLS unique identifier and the total finance charge expressed as a dollar amount

    Stating the amount of any payment is a trigger term in a closed-end credit ad, along with the amount or percentage of a down payment, the number of payments or period of repayment, and the amount of any finance charge. Once a trigger term appears, the ad must clearly and conspicuously state the down payment amount or percentage, the terms of repayment, and the annual percentage rate. Stating only the APR triggers nothing.

    Source: 12 CFR 1026.24(d) (advertisement of terms that require additional disclosures)Report a problem with this question

17. 17. A loan is classified as a high-cost mortgage under HOEPA. Which requirement or prohibition applies?

    • A.The loan must be sold or assigned to a government-sponsored enterprise within 90 days of consummation so that its terms can be federally supervised
    • B.A second appraisal at the lender's expense is required whenever the property was resold within the prior year at a higher price
    • C.An escrow account for taxes and insurance must be maintained for at least five years, but a prepayment penalty remains permitted during the first two years
    • D.The borrower must receive homeownership counseling from a HUD-approved counselor before the loan is made, and prepayment penalties are prohibited✓ Answer

    Once any one of HOEPA's three triggers (APR spread, points and fees, or prepayment penalty) is crossed, the loan becomes a high-cost mortgage and a package of restrictions attaches: mandatory pre-loan counseling from a HUD-approved counselor, plus bans on prepayment penalties, balloon payments (with narrow exceptions), negative amortization, financing points and fees, default interest-rate increases, and recommending default. The five-year escrow and second-appraisal-on-flip rules belong to the separate higher-priced mortgage loan category.

    Source: 12 CFR 1026.32(b)(1), 1026.34(a)(4)-(5) (high-cost mortgage restrictions and counseling)Report a problem with this question

18. 18. Under Regulation Z's loan originator compensation rule, which basis for paying an individual loan originator is PERMITTED?

    • A.Extra compensation for loans that include a prepayment penalty
    • B.A higher commission when the loan-to-value ratio exceeds a set level
    • C.A bonus that increases with the interest rate on each closed loan
    • D.A fixed percentage of the loan amount, applied consistently across transactions✓ Answer

    Regulation Z forbids compensating a loan originator based on a term of the transaction or any proxy for a term — the interest rate, the presence of a prepayment penalty, and the loan-to-value ratio are all transaction terms. A fixed percentage of the loan amount is expressly allowed because loan amount is treated as a permissible basis, as are loan volume, hours worked, pull-through rate, and file quality.

    Source: 12 CFR 1026.36(d)(1) (prohibited payments to loan originators)Report a problem with this question

19. 19. A married applicant qualifies for the mortgage on her own income and credit. The MLO tells her the lender still requires her husband to sign the note. Under ECOA, this is:

    • A.Permitted, because both spouses will occupy the property and each therefore has an interest the lender is entitled to have on the note
    • B.A violation only if the couple lives in a community property state, where spousal signature rules are governed by state law instead
    • C.A violation, because a creditor may not require a spouse's signature when the applicant qualifies independently under the creditor's standards✓ Answer
    • D.Permitted, because the lender may exercise prudent underwriting judgment and require any additional signature it reasonably considers necessary

    Regulation B prohibits requiring the signature of an applicant's spouse or other person on a credit instrument when the applicant qualifies on her own under the creditor's standards of creditworthiness. Marital status is a prohibited basis, and the rule exists precisely to stop creditors from conditioning individual credit on a spouse's participation; a creditor may require a non-applicant's signature only on documents needed to perfect the security interest, such as a deed of trust.

    Source: 12 CFR 1002.7(d)(1) (signature requirements)Report a problem with this question

20. 20. Which protected class is covered by the Equal Credit Opportunity Act but is NOT one of the classes protected by the federal Fair Housing Act?

    • A.National origin, such as the applicant's country of birth
    • B.Familial status, meaning a household with children under 18
    • C.Receipt of income from a public assistance program✓ Answer
    • D.Disability, whether physical or mental

    ECOA's prohibited bases include race, color, religion, national origin, sex, marital status, age, receipt of public assistance income, and the good-faith exercise of rights under the Consumer Credit Protection Act. The Fair Housing Act covers race, color, religion, sex, national origin, familial status, and disability — so age, marital status, and public assistance income are unique to ECOA, while familial status and disability are unique to the FHA.

    Source: 15 USC 1691(a); 12 CFR 1002.2(z); Fair Housing Act, 42 USC 3604-3605Report a problem with this question

21. 21. An MLO tells a borrower whose loan was denied that she will get the reasons 'sometime after closing season.' Under ECOA, notice of action taken on a completed application must be given within:

    • A.90 days after receiving the completed application
    • B.30 days after receiving the completed application✓ Answer
    • C.15 days after the credit decision
    • D.60 days after the application date

    Regulation B requires notification of action taken within 30 days after receiving a completed application, and the same 30-day clock applies to adverse action on an existing account and to a counteroffer the applicant does not accept. The 90-day period applies only to notice regarding an incomplete application. The adverse action notice must state either the specific principal reasons or the applicant's right to request them within 60 days.

    Source: 12 CFR 1002.9(a)(1) (notifications)Report a problem with this question

22. 22. An MLO reviewing a file notices a series of $9,500 cash deposits made on consecutive days and suspects the borrower is breaking up a larger sum. After the company files a SAR, may the MLO tell the borrower?

    • A.No — a SAR and its existence are confidential, and disclosing them to the subject is prohibited✓ Answer
    • B.Yes, but only if the borrower asks directly and the MLO documents the question and answer in the file
    • C.Yes, because federal privacy law gives the borrower a right to see everything in his own loan file
    • D.Only after the 30-day filing deadline has passed and law enforcement has reviewed the report

    The Bank Secrecy Act makes a suspicious activity report and any information revealing its existence strictly confidential — 'tipping off' the subject is itself a violation and would defeat the report's law-enforcement purpose. The filer is protected by a statutory safe harbor from liability for filing, must file within 30 calendar days of initial detection, and must retain supporting documentation for five years. Splitting cash to stay under the currency reporting threshold is structuring, a separate federal crime.

    Source: 31 CFR 1029.320(d) (SAR confidentiality) and 1029.320(b)(3) (filing deadline)Report a problem with this question

23. 23. Which of the following loans is covered by RESPA (Regulation X)?

    • A.A loan to purchase a 30-acre parcel of vacant land
    • B.A purchase loan on an owner-occupied single-family home✓ Answer
    • C.A temporary construction loan to build a new home
    • D.A loan on a duplex made solely for business purposes

    RESPA applies to federally related mortgage loans secured by residential property of one to four units, so a purchase loan on an owner-occupied single-family home is squarely covered. Vacant land of 25 acres or more, temporary construction financing, and loans made primarily for business purposes are all expressly exempt from Regulation X.

    Source: RESPA / Regulation X, 12 CFR 1024.5 (coverage and exemptions)Report a problem with this question

24. 24. An individual is criminally convicted of paying illegal kickbacks in violation of RESPA Section 8. What is the maximum penalty per violation?

    • A.A fine of up to $1,000 and/or up to 5 years in prison
    • B.A fine of up to $10,000 and/or up to 1 year in prison✓ Answer
    • C.A fine of up to $25,000 and/or up to 3 years in prison
    • D.A fine of up to $5,000 and/or up to 6 months in prison

    RESPA Section 8(d) makes paying or receiving kickbacks, referral fees, or unearned fees a crime punishable by a fine of up to $10,000, imprisonment for up to one year, or both, for each violation. This dual criminal exposure is what makes Section 8 the most heavily enforced provision of RESPA.

    Source: RESPA Section 8(d), 12 U.S.C. 2607(d)Report a problem with this question

25. 25. Under RESPA Section 10, what is the largest escrow cushion a servicer may require a borrower to maintain?

    • A.One-half of the estimated annual disbursements
    • B.One-twelfth of the estimated annual disbursements
    • C.One-fourth of the estimated annual disbursements
    • D.One-sixth of the estimated annual disbursements✓ Answer

    Section 10 of RESPA and Regulation X cap the escrow cushion at one-sixth of the estimated total annual disbursements for taxes and insurance, which equals about two months of escrow payments. Servicers cannot pad the account beyond that cushion, and overages above $50 generally must be refunded.

    Source: RESPA Section 10; Regulation X, 12 CFR 1024.17(c) (1/6 escrow cushion limit)Report a problem with this question

26. 26. A borrower has missed several mortgage payments. Under Regulation X's servicing rules, the servicer generally may not make the first foreclosure notice or filing until the borrower is delinquent for more than how many days?

    • A.90 days
    • B.120 days✓ Answer
    • C.30 days
    • D.60 days

    Regulation X's loss-mitigation rules prohibit a servicer from making the first foreclosure notice or filing until the borrower is more than 120 days delinquent. This waiting period exists to give the borrower time to submit a loss-mitigation application before foreclosure begins.

    Source: Regulation X, 12 CFR 1024.41(f)(1) (120-day pre-foreclosure waiting period)Report a problem with this question

27. 27. A creditor places the Closing Disclosure in the mail to the borrower on Monday. Saturdays count as business days, Sundays do not, and there are no holidays. What is the earliest day consummation may occur?

    • A.The Friday of that same week
    • B.The Saturday of that same week
    • C.The Thursday of that same week
    • D.The Monday of the following week✓ Answer

    Under the mailbox rule, a mailed Closing Disclosure is deemed received three business days after mailing — Tuesday, Wednesday, Thursday — so receipt is Thursday. Consummation then requires three more business days after receipt: Friday, Saturday, and (skipping Sunday) Monday, making the following Monday the earliest closing date.

    Source: Regulation Z, 12 CFR 1026.19(f)(1)(ii)-(iii) (CD three-business-day waiting period and mailbox rule)Report a problem with this question

28. 28. A consumer has submitted the six pieces of application information but has not yet received the Loan Estimate or indicated intent to proceed. Which fee may the creditor collect at this point?

    • A.A nonrefundable application processing fee
    • B.A deposit to lock in the quoted interest rate
    • C.A bona fide and reasonable credit report fee✓ Answer
    • D.An upfront fee to order the home appraisal

    TRID prohibits a creditor from imposing any fee before the consumer has received the Loan Estimate and indicated an intent to proceed, with one exception: a bona fide and reasonable fee for obtaining the consumer's credit report. Application, rate-lock, and appraisal fees must all wait until intent to proceed is communicated.

    Source: Regulation Z, 12 CFR 1026.19(e)(2)(i) (fee restriction before intent to proceed; credit report exception)Report a problem with this question

29. 29. Which of the following transactions is NOT subject to TRID's Loan Estimate and Closing Disclosure requirements?

    • A.A home equity line of credit (HELOC)✓ Answer
    • B.A rate-and-term refinance of a home
    • C.A closed-end second lien on a home
    • D.A purchase loan on a condominium unit

    TRID applies to most closed-end consumer credit transactions secured by real property, but HELOCs, reverse mortgages, and loans secured by mobile homes not attached to land are excluded. A HELOC is open-end credit, so it receives its own Regulation Z disclosures rather than the Loan Estimate and Closing Disclosure.

    Source: Regulation Z, 12 CFR 1026.19(e)-(f) (TRID scope; HELOCs and reverse mortgages excluded)Report a problem with this question

30. 30. Under TRID's good-faith (tolerance) rules, which charge may increase by any amount at closing without requiring the creditor to cure?

    • A.Transfer taxes imposed by state or local government
    • B.Origination fees the creditor charges the borrower
    • C.Recording fees charged by the county land office
    • D.Prepaid interest and homeowner's insurance premiums✓ Answer

    Prepaid interest, property insurance premiums, and amounts placed into escrow fall in the unlimited-tolerance category because they depend on factors outside the creditor's control, so they may change by any amount if the original estimate was made in good faith. Creditor origination fees and transfer taxes carry zero tolerance, and recording fees fall in the 10% aggregate bucket.

    Source: Regulation Z, 12 CFR 1026.19(e)(3)(iii) (charges that may change without tolerance limit)Report a problem with this question

31. 31. A borrower refinancing her principal residence wants her loan funds released before the three-day rescission period ends. How may the right of rescission be waived?

    • A.By a dated, signed written statement describing a bona fide personal financial emergency✓ Answer
    • B.By signing a preprinted waiver form the creditor includes with the rescission notice
    • C.By an oral request made at closing that the settlement agent records in the loan file
    • D.It cannot be waived; the borrower must always wait out the full three-day period

    Regulation Z allows a consumer to waive rescission only for a bona fide personal financial emergency, and only by giving the creditor a dated, signed written statement that describes the emergency and specifically waives the right. Printed form waivers are expressly prohibited, and oral requests have no effect.

    Source: Regulation Z, 12 CFR 1026.23(e) (waiver of the right of rescission)Report a problem with this question

32. 32. On a regular closed-end mortgage transaction, the disclosed APR is considered accurate under Regulation Z if it does not vary from the actual APR by more than what amount?

    • A.1/2 of 1 percentage point (0.50%)
    • B.A full 1 percentage point (1.00%)
    • C.1/8 of 1 percentage point (0.125%)✓ Answer
    • D.1/4 of 1 percentage point (0.25%)

    Regulation Z deems the disclosed APR accurate on a regular transaction if it is within 1/8 of 1 percentage point (0.125%) above or below the true rate; irregular transactions get a 1/4-point tolerance. An APR error beyond tolerance after the Closing Disclosure is delivered forces re-disclosure and a new three-business-day waiting period.

    Source: Regulation Z, 12 CFR 1026.22(a)(2) (APR accuracy tolerance for regular transactions)Report a problem with this question

33. 33. A non-jumbo first-lien loan secured by the borrower's principal dwelling has an APR that exceeds the APOR by 2 percentage points. How is this loan classified, and what does that generally require?

    • A.A subprime mortgage, requiring a larger minimum down payment
    • B.A high-cost mortgage, requiring homeownership counseling
    • C.A qualified mortgage, requiring no added compliance steps
    • D.A higher-priced mortgage loan, requiring an escrow account✓ Answer

    A first-lien loan becomes a higher-priced mortgage loan (HPML) when its APR is at least 1.5 percentage points over the APOR (2.5 for jumbo, 3.5 for subordinate liens), so a 2-point spread qualifies. An HPML generally requires an escrow account for taxes and insurance maintained for at least five years; the 6.5-point HOEPA high-cost threshold is not reached here.

    Source: Regulation Z, 12 CFR 1026.35 (HPML definition and escrow requirement)Report a problem with this question

34. 34. Under Regulation B, when must a lender provide the applicant a copy of the appraisal on a first-lien loan secured by a dwelling?

    • A.Promptly upon completion, or three business days before consummation✓ Answer
    • B.Only when the application is denied because of the appraised value
    • C.At the closing table, together with the final Closing Disclosure
    • D.Within thirty days after closing, and only if the applicant asks

    Regulation B's valuations rule requires the creditor to provide copies of all appraisals and written valuations promptly upon completion, or three business days before consummation, whichever is earlier. The copy must be given automatically to every applicant on a first-lien dwelling-secured application — approved or denied — not only on request.

    Source: Regulation B, 12 CFR 1002.14(a)(1) (copies of appraisals and written valuations)Report a problem with this question

35. 35. A borrower with a conventional loan and a good payment history wants private mortgage insurance (PMI) removed. Under the Homeowners Protection Act, she may request cancellation when the loan balance first reaches what share of the home's original value?

    • A.78%
    • B.70%
    • C.80%✓ Answer
    • D.75%

    The Homeowners Protection Act lets a borrower with a good payment history request PMI cancellation once the balance reaches 80% of the home's original value. The 78% figure is the separate automatic-termination trigger, at which the servicer must cancel PMI on the scheduled date without any request from the borrower.

    Source: Homeowners Protection Act of 1998 (borrower-requested cancellation at 80%; automatic termination at 78%)Report a problem with this question

36. 36. Under the FACTA Red Flags Rule, a mortgage lender must establish and maintain which of the following?

    • A.A written privacy notice covering information-sharing opt-outs
    • B.A written program to detect and respond to identity theft✓ Answer
    • C.A written file of its advertisements kept for twenty-four months
    • D.A written program to detect and report money laundering

    The Red Flags Rule, issued under FACTA, requires creditors to maintain a written Identity Theft Prevention Program that identifies, detects, and responds to warning signs of identity theft in covered accounts. The other options describe different laws: AML programs come from the BSA, privacy notices from GLBA, and 24-month ad retention from Regulation N.

    Source: FACTA Red Flags Rule, 16 CFR 681.1 (written Identity Theft Prevention Program)Report a problem with this question

37. 37. Which pairing of a federal regulation with the statute it implements is correct?

    • A.Regulation X — Truth in Lending Act
    • B.Regulation B — Mortgage Acts and Practices Rule
    • C.Regulation Z — Real Estate Settlement Procedures Act
    • D.Regulation C — Home Mortgage Disclosure Act✓ Answer

    Regulation C implements the Home Mortgage Disclosure Act, which requires lenders to report loan application data to detect discrimination and redlining. The distractors swap the letters: Regulation Z implements TILA, Regulation X implements RESPA, Regulation B implements ECOA, and Regulation N is the MAP advertising rule.

    Source: 12 CFR 1003 (Regulation C implements HMDA); Reg Z=TILA, Reg X=RESPA, Reg B=ECOA, Reg N=MAPReport a problem with this question

Practice questions written to the published NMLS content outline for the SAFE MLO National Test Component with Uniform State Content, and to the underlying federal regulations (TILA/Regulation Z, RESPA/Regulation X, ECOA/Regulation B, HMDA, FCRA, GLBA, the Fair Housing Act, and the S.A.F.E. Mortgage Licensing Act). NMLS is a service of the Conference of State Bank Supervisors; this site is not affiliated with or endorsed by NMLS, the CSBS, the CFPB, or any state regulator. Dollar thresholds, loan limits, mortgage insurance factors, funding fees, license fees and bond amounts are adjusted periodically and are deliberately not tested here — confirm current figures and your own state's requirements with your state regulator before testing. Nothing here is legal or financial advice. About the NMLS SAFE MLO test →