RESPA & Regulation X: practice questions

A real estate brokerage owns part of a title agency and refers its clients there. Which of these is NOT a condition for the affiliated business arrangement to comply with Regulation X?

1. Each client must first obtain two competing title quotes ✓
2. Each client gets a written disclosure of the relationship
3. No client is required to use the affiliated title agency
4. The brokerage receives only a return on its ownership

Why: 12 CFR 1024.15(b) sets three conditions: a written disclosure of the relationship and estimated charges, in the appendix D format; no required use of the affiliated provider (with narrow exceptions); and nothing of value received beyond a return on the ownership interest or franchise relationship and payments 1024.14(g) permits. Competing quotes are not a condition.

Source: 12 CFR 1024.15(b)

Under Regulation X, which of these describes a "mortgage broker"?

1. A lender's own employee who takes loan applications
2. A non-employee go-between for borrower and lender ✓
3. Any company that services loans for other investors
4. A real estate agent who refers buyers to a lender

Why: 12 CFR 1024.2 defines a mortgage broker as a person, other than an employee of a lender, that renders origination services and serves as an intermediary between a borrower and a lender in a transaction involving a federally related mortgage loan, including one that closes the loan in its own name in a table-funded transaction. A lender's employee is expressly outside the definition.

Source: 12 CFR 1024.2

A lender receives a completed mortgage application on Monday. By when must it give the applicant the list of homeownership counseling organizations?

1. Within 7 business days after receiving it
2. Within 3 business days after receiving it ✓
3. At least 3 business days before closing
4. Only if the applicant asks the lender for it

Why: 12 CFR 1024.20(a)(1) requires the lender to provide a clear and conspicuous written list of homeownership counseling organizations in the applicant's location not later than three business days after a lender, mortgage broker or dealer receives an application. The list must be obtained from the CFPB's data no earlier than 30 days before it is given.

Source: 12 CFR 1024.20(a)(1)

Which of these is NOT one of the purposes Congress stated for RESPA?

1. Setting a ceiling on mortgage interest rates ✓
2. Better advance disclosure of settlement costs
3. Eliminating kickbacks and referral fees
4. Reducing amounts required to be escrowed

Why: 12 U.S.C. 2601(b) lists four purposes: more effective advance disclosure of settlement costs to buyers and sellers, the elimination of kickbacks or referral fees that increase settlement costs, a reduction in the amounts home buyers must place in escrow, and reform of local recordkeeping of land title information. RESPA does not regulate interest rates.

Source: 12 U.S.C. 2601(b)

A borrower refinances the first mortgage on her single-family home with a bank whose deposits are FDIC-insured. Is the refinance a federally related mortgage loan covered by RESPA?

1. No; RESPA covers purchase loans and never refinances
2. No; only loans insured by FHA or VA are federally related
3. Yes; a 1-4 family lien loan from an insured lender is covered ✓
4. Only if the loan is later sold to Fannie Mae or Ginnie Mae

Why: Under 12 CFR 1024.2 a federally related mortgage loan includes any loan, including a refinancing, secured by a first or subordinate lien on residential property designed for one to four families, made in whole or in part by a lender regulated by or whose deposits are insured by a federal agency. FHA or VA involvement and sale to the agencies are alternative routes into coverage, not requirements.

Source: 12 CFR 1024.2