SAFE Mortgage Loan Originator Test
QUESTIONS AND ANSWERS
What does UST stand for? - ANSWER>>Uniform State Test
Who does the CFPB protect? - ANSWER>>The Consumer Financial Protection Bureau protects
consumers in the financial marketplace.
What does the CFPB do? - ANSWER>>CFPB is now in charge of implementing and enforcing
most of the provisions of federal lending laws that relate to protecting consumers while they
are shopping for, securing, and paying off mortgages.
What is the purpose of RESPA? (3 things) - ANSWER>>a.Protect consumers from excessive
settlement costs and unearned fees
b.Limit the amount of funds that creditors can require consumers to deposit into escrow
accounts
c.Establish disclosures, policies, and procedures to facilitate timely communications between
loan servicers and consumers
Who is responsible for the enforcement of RESPA and for issuing implementing regulations? -
ANSWER>>The CFPB
What are RESPA's regulations called? - ANSWER>>Regulation X
Which 2 documents replaced RESPA's Good Faith Estimate and the Truth-in-Lending Disclosure?
- ANSWER>>1.) Loan Estimate
2.) Closing Disclosure
What types of mortgages does RESPA cover? - ANSWER>>"Federally-related mortgage loans,"
the requirements of RESPA apply to virtually every home loan secured by a mortgage.
What type of loans does RESPA not pertain to? - ANSWER>>a. Loans for business, commercial,
or agricultural purposes
b. Temporary financing
,c. Loans secured by vacant land
d. The sale of a loan into the secondary market
e. Loan conversions (same note - new terms)
Is compensating someone for a referral legal? - ANSWER>>No!!!
What is "borrower credit"? - ANSWER>>Historically referred to as "yield spread premium"
(YSP), the borrower credit is a fee paid to the borrower by the lender when a loan is originated
at a higher interest rate than the lowest rate for which the borrower qualifies. The borrower
credit is used to subsidize closing costs, such as the origination or broker fee, because it is
financed so that out-of-pocket closing costs are "borrowed" from the lender.
What is a markup? - ANSWER>>A unilateral increase in the cost of a settlement service and
retention of the additional fee by the party making the markup. The controversy over markups
and their legality is discussed in a subsequent course section. As a practice that may easily lead
to litigation, it is one that should not be used without obtaining legal advice.
What are the 5 disclosures required by RESPA? - ANSWER>>1.) Loan Estimate
2.) Closing Disclosure
3.) Settlement Cost Information Booklet
4.) Mortgage Servicing Disclosure Statement
5.) Affiliated Business Arrangement Disclosure
Are creditors allowed to add their name to the cover of the Special Information Booklet sent to
borrowers? - ANSWER>>Yes
Are they allowed to translate it into other languages? - ANSWER>>Yes
Are they allowed to send it with other materials in a larger document? - ANSWER>>No
For a loan with a co-borrower, must each applicant receive a Special Information Booklet? -
ANSWER>>No, only one person has to receive.
After a loan application is submitted, how many business days later must a borrower receive
their Special Information Booklet? - ANSWER>>3 days (for purchase only)
,When is a Special Information Booklet not required to be sent? (3 ANSWERs) - ANSWER>>1.) A
refinance
2.) A closed-end loan secured by a subordinate lien
3.) A reverse mortgage loan
How long does RESPA require a lender to keep each Affiliated Business Arrangement
disclosure? - ANSWER>>5 years
If a MLO recommends a particular settlement service provider over the phone, in how many
days must a borrower receive a disclosure in the mail? - ANSWER>>3 business days
If a settlement service provider refers a loan applicant to an affiliated business for settlement
services, he or she must disclose the affiliated business arrangement...? - ANSWER>>At the
time the referral is made.
On which document does the lender specify if he will service the loan or sell the servicing to
someone else? - ANSWER>>On the Loan Estimate
RESPA and Regulation X still impose a requirement on servicers to provide notice to consumers
of any assignment, sale, or transfer of servicing. How many days before a switch, must a
servicer disclose that a switch will occur? - ANSWER>>15 days
How many months cushion can a servicer require a borrower to keep in his/her escrow
account? - ANSWER>>one sixth of the estimated total annual disbursements = 2 months
payments
If there is a surplus in excess of 2 months required disbursements in one's escrow account by
$45 dollars, must it be returned to the borrower? - ANSWER>>No, it will be credited to next
year. Only funds equal to or in excess of $50 must be returned.
What are the 2 mandatory escrow account disclosures? - ANSWER>>1.) the initial escrow
statement and 2.) the annual escrow statement.
When is the initial escrow statement required to be given to the borrower, and what must it
include? - ANSWER>>While this disclosure is typically given at settlement, the lender has 45
days from settlement to deliver it. The initial escrow statement must show:
, 1.) The amount of the borrower's mortgage payment and the portion that is deposited into the
escrow account
2.) Itemized taxes, insurance, and other payments to be made from the escrow account during
the computation year
3.) The amount that the servicer has selected as a cushion
4.) A "trial running balance" (the accounting process used to reach target balances over the
course of a computation year)
When is the annual escrow statement required to be disclosed, and what must it include? -
ANSWER>>This disclosure is due within 30 days of completion of the escrow account
computation year, and it must provide:
1.) An account history and a projection of the payments for the coming year
2.) A statement showing both last year's and the current year's monthly mortgage payment,
and the amount of the payment that is deposited into the escrow account
3.) The total amount paid both into and out of the escrow account for the past computation
year
4.) The escrow account balance at the end of the period and an explanation of how the servicer
is handling any surplus
5.) An explanation of how the borrower is to pay any deficiency
If a loan's servicing is transferred to a new servicer, the new servicer must provide an initial
escrow account statement within how many days of the date on which the transfer occurs? -
ANSWER>>60 days
What is force-placed insurance? - ANSWER>>Regulation X defines "force-placed insurance" as
hazard insurance that a servicer obtains on behalf of the owner or assignee of a mortgage loan
in order to insure the property securing the mortgage. Servicers may not charge a borrower for
force-placed insurance unless there is a reasonable basis to believe that the borrower has failed
to maintain hazard insurance on his/her own.
QUESTIONS AND ANSWERS
What does UST stand for? - ANSWER>>Uniform State Test
Who does the CFPB protect? - ANSWER>>The Consumer Financial Protection Bureau protects
consumers in the financial marketplace.
What does the CFPB do? - ANSWER>>CFPB is now in charge of implementing and enforcing
most of the provisions of federal lending laws that relate to protecting consumers while they
are shopping for, securing, and paying off mortgages.
What is the purpose of RESPA? (3 things) - ANSWER>>a.Protect consumers from excessive
settlement costs and unearned fees
b.Limit the amount of funds that creditors can require consumers to deposit into escrow
accounts
c.Establish disclosures, policies, and procedures to facilitate timely communications between
loan servicers and consumers
Who is responsible for the enforcement of RESPA and for issuing implementing regulations? -
ANSWER>>The CFPB
What are RESPA's regulations called? - ANSWER>>Regulation X
Which 2 documents replaced RESPA's Good Faith Estimate and the Truth-in-Lending Disclosure?
- ANSWER>>1.) Loan Estimate
2.) Closing Disclosure
What types of mortgages does RESPA cover? - ANSWER>>"Federally-related mortgage loans,"
the requirements of RESPA apply to virtually every home loan secured by a mortgage.
What type of loans does RESPA not pertain to? - ANSWER>>a. Loans for business, commercial,
or agricultural purposes
b. Temporary financing
,c. Loans secured by vacant land
d. The sale of a loan into the secondary market
e. Loan conversions (same note - new terms)
Is compensating someone for a referral legal? - ANSWER>>No!!!
What is "borrower credit"? - ANSWER>>Historically referred to as "yield spread premium"
(YSP), the borrower credit is a fee paid to the borrower by the lender when a loan is originated
at a higher interest rate than the lowest rate for which the borrower qualifies. The borrower
credit is used to subsidize closing costs, such as the origination or broker fee, because it is
financed so that out-of-pocket closing costs are "borrowed" from the lender.
What is a markup? - ANSWER>>A unilateral increase in the cost of a settlement service and
retention of the additional fee by the party making the markup. The controversy over markups
and their legality is discussed in a subsequent course section. As a practice that may easily lead
to litigation, it is one that should not be used without obtaining legal advice.
What are the 5 disclosures required by RESPA? - ANSWER>>1.) Loan Estimate
2.) Closing Disclosure
3.) Settlement Cost Information Booklet
4.) Mortgage Servicing Disclosure Statement
5.) Affiliated Business Arrangement Disclosure
Are creditors allowed to add their name to the cover of the Special Information Booklet sent to
borrowers? - ANSWER>>Yes
Are they allowed to translate it into other languages? - ANSWER>>Yes
Are they allowed to send it with other materials in a larger document? - ANSWER>>No
For a loan with a co-borrower, must each applicant receive a Special Information Booklet? -
ANSWER>>No, only one person has to receive.
After a loan application is submitted, how many business days later must a borrower receive
their Special Information Booklet? - ANSWER>>3 days (for purchase only)
,When is a Special Information Booklet not required to be sent? (3 ANSWERs) - ANSWER>>1.) A
refinance
2.) A closed-end loan secured by a subordinate lien
3.) A reverse mortgage loan
How long does RESPA require a lender to keep each Affiliated Business Arrangement
disclosure? - ANSWER>>5 years
If a MLO recommends a particular settlement service provider over the phone, in how many
days must a borrower receive a disclosure in the mail? - ANSWER>>3 business days
If a settlement service provider refers a loan applicant to an affiliated business for settlement
services, he or she must disclose the affiliated business arrangement...? - ANSWER>>At the
time the referral is made.
On which document does the lender specify if he will service the loan or sell the servicing to
someone else? - ANSWER>>On the Loan Estimate
RESPA and Regulation X still impose a requirement on servicers to provide notice to consumers
of any assignment, sale, or transfer of servicing. How many days before a switch, must a
servicer disclose that a switch will occur? - ANSWER>>15 days
How many months cushion can a servicer require a borrower to keep in his/her escrow
account? - ANSWER>>one sixth of the estimated total annual disbursements = 2 months
payments
If there is a surplus in excess of 2 months required disbursements in one's escrow account by
$45 dollars, must it be returned to the borrower? - ANSWER>>No, it will be credited to next
year. Only funds equal to or in excess of $50 must be returned.
What are the 2 mandatory escrow account disclosures? - ANSWER>>1.) the initial escrow
statement and 2.) the annual escrow statement.
When is the initial escrow statement required to be given to the borrower, and what must it
include? - ANSWER>>While this disclosure is typically given at settlement, the lender has 45
days from settlement to deliver it. The initial escrow statement must show:
, 1.) The amount of the borrower's mortgage payment and the portion that is deposited into the
escrow account
2.) Itemized taxes, insurance, and other payments to be made from the escrow account during
the computation year
3.) The amount that the servicer has selected as a cushion
4.) A "trial running balance" (the accounting process used to reach target balances over the
course of a computation year)
When is the annual escrow statement required to be disclosed, and what must it include? -
ANSWER>>This disclosure is due within 30 days of completion of the escrow account
computation year, and it must provide:
1.) An account history and a projection of the payments for the coming year
2.) A statement showing both last year's and the current year's monthly mortgage payment,
and the amount of the payment that is deposited into the escrow account
3.) The total amount paid both into and out of the escrow account for the past computation
year
4.) The escrow account balance at the end of the period and an explanation of how the servicer
is handling any surplus
5.) An explanation of how the borrower is to pay any deficiency
If a loan's servicing is transferred to a new servicer, the new servicer must provide an initial
escrow account statement within how many days of the date on which the transfer occurs? -
ANSWER>>60 days
What is force-placed insurance? - ANSWER>>Regulation X defines "force-placed insurance" as
hazard insurance that a servicer obtains on behalf of the owner or assignee of a mortgage loan
in order to insure the property securing the mortgage. Servicers may not charge a borrower for
force-placed insurance unless there is a reasonable basis to believe that the borrower has failed
to maintain hazard insurance on his/her own.
