RESPA & Regulation X: practice questions

Which of these is NOT listed as a settlement service in Regulation X's definition?

1. An appraisal and a credit report on the borrower
2. A moving company the buyer picks and pays for herself ✓
3. A title search and issuing the title insurance policy
4. A pest inspection required by the sales contract

Why: The definition of settlement service in 12 CFR 1024.2 lists, among others, origination, title services including searches and the issuance of policies, the rendering of credit reports and appraisals, and inspections required by law or by the sales contract. A mover the buyer chooses and pays independently is not a service provided in connection with the settlement.

Source: 12 CFR 1024.2

For an escrow account required as a condition of the loan, when must the servicer give the borrower the initial escrow account statement?

1. Within 30 days after the first payment is due
2. At the end of the first escrow computation year
3. At settlement or within 45 calendar days of it ✓
4. Within 10 business days after the loan closes

Why: 12 CFR 1024.17(g)(1) requires the servicer to submit an initial escrow account statement at settlement or within 45 calendar days of settlement for escrow accounts established as a condition of the loan. It shows the monthly payment, the escrow portion and the itemized taxes, insurance and other charges anticipated.

Source: 12 CFR 1024.17(g)(1)

Servicing of a loan is being transferred with an effective date of 1 June. By when must the transferring servicer normally notify the borrower?

1. At least 30 days before 1 June
2. At least 15 days before 1 June ✓
3. No more than 15 days after 1 June
4. At least 60 days before 1 June

Why: 12 CFR 1024.33(b)(3)(i) requires the transferor servicer to give the notice of transfer not less than 15 days before the effective date. The transferee servicer's notice is due not more than 15 days after it, and a single joint notice must go at least 15 days before.

Source: 12 CFR 1024.33(b)(3)

A seller tells a buyer that the sale will go ahead only if the buyer buys title insurance from the seller's preferred title company. What is the seller's exposure under RESPA?

1. A fine payable to the CFPB of up to $10,000 per sale
2. None, as sellers are outside RESPA's scope
3. Only the loss of the seller's own title policy
4. Liability to the buyer of three times the title charges ✓

Why: 12 U.S.C. 2608 (section 9 of RESPA) bars a seller from requiring, as a condition of the sale, that the buyer purchase title insurance from any particular title company, and makes a seller who violates it liable to the buyer for three times all charges made for the title insurance.

Source: 12 U.S.C. 2608

A lender adds a $300 "document review fee" to the closing costs, shares it with a second company, and neither performs any review. How does Regulation X treat the charge?

1. Lawful, because the borrower agreed to pay the fee
2. Lawful, as long as the fee is split in equal halves
3. An issue only if the fee exceeds 1% of the loan
4. An unearned fee: no services were actually performed ✓

Why: 12 CFR 1024.14(c) bars giving or accepting any portion, split or percentage of a charge for a settlement service other than for services actually performed, and says a charge for which no or nominal services are performed is an unearned fee. The borrower's agreement to pay does not change what was done for the money.

Source: 12 CFR 1024.14(c)

A lender insists that its borrowers pay for an appraiser the lender chooses to protect its own interest. Does this breach the "no required use" condition for affiliated business arrangements?

1. Yes; a lender may never require a particular provider at all
2. No, but only if the lender's appraiser has no interest in it
3. No; a lender may require its own appraiser for its interest ✓
4. Yes, unless the borrower gets to choose from a list of three

Why: 12 CFR 1024.15(b)(2) carves out a lender requiring a buyer, borrower or seller to pay for the services of an attorney, credit reporting agency or real estate appraiser chosen by the lender to represent the lender's interest.

Source: 12 CFR 1024.15(b)(2)

A borrower has stopped paying the mortgage on her principal residence. Under Regulation X, when is the earliest the servicer may make the first notice or filing to start foreclosure, absent a due-on-sale breach or another lienholder's action?

1. Once the loan is more than 60 days delinquent
2. After the first missed-payment letter
3. Once the loan is more than 120 days delinquent ✓
4. Once the loan is more than 36 days delinquent

Why: 12 CFR 1024.41(f)(1) bars the first notice or filing for any judicial or non-judicial foreclosure unless the loan obligation is more than 120 days delinquent, the foreclosure rests on a due-on-sale violation, or the servicer is joining another lienholder's action. The 36th day is the deadline for live contact under 1024.39(a), not a foreclosure date.

Source: 12 CFR 1024.41(f)(1)

An escrow analysis for a borrower who is current shows a surplus of $85. What must the servicer do?

1. Refund it within 30 days of the analysis ✓
2. Keep it as extra cushion for next year
3. Refund it within 90 days of the analysis
4. Credit it only if the borrower asks for it

Why: Under 12 CFR 1024.17(f)(2)(i), if an escrow analysis shows a surplus of $50 or more the servicer must refund it to the borrower within 30 days from the date of the analysis; below $50 it may refund or credit it. The rule applies where the borrower is current, as this one is.

Source: 12 CFR 1024.17(f)(2)