TRID: Loan Estimate & Closing Disclosure: practice questions

A creditor denies an application two days after receiving it. Must it still send the special information booklet?

1. Yes; the booklet must go to every applicant regardless
2. Yes, but it may be sent with the adverse action notice
3. No; it need not if it denies within the 3 business days ✓
4. No, unless the applicant asks the creditor for a copy

Why: Under 12 CFR 1026.19(g)(1)(i), "if the creditor denies the consumer's application before the end of the three-business-day period, the creditor need not provide the booklet".

Source: 12 CFR 1026.19(g)(1)(i)

On the Loan Estimate's Comparisons table, what does the Total Interest Percentage (TIP) show?

1. Total interest over the loan term as a share of the loan amount ✓
2. The interest rate after any adjustable-rate changes are applied
3. The cost of credit over the term, expressed as a yearly rate
4. Interest paid in the first five years as a share of all payments

Why: 12 CFR 1026.37(l)(3) defines the TIP as the total amount of interest the consumer will pay over the life of the loan, expressed as a percentage of the amount of credit extended. The APR, the cost of credit expressed as a rate, is a separate row under 1026.37(l)(2).

Source: 12 CFR 1026.37(l)(3)

Which of these transactions does NOT receive a Loan Estimate under Regulation Z's integrated disclosure rules?

1. A home equity line of credit ✓
2. A fixed-rate purchase loan
3. A closed-end cash-out refinance
4. A closed-end second mortgage

Why: 12 CFR 1026.19(e)(1)(i) requires the Loan Estimate in a closed-end consumer credit transaction secured by real property or a cooperative unit, other than a reverse mortgage subject to 1026.33. A home equity line of credit is open-end credit, which has its own disclosures under 1026.40.

Source: 12 CFR 1026.19(e)(1)(i)

A loan officer gives a consumer a written worksheet of estimated rate and costs before any Loan Estimate is issued. What must the worksheet carry?

1. The creditor's NMLS ID and the date the rate expires
2. The same form and headings as the official Loan Estimate
3. Nothing, because informal estimates are not regulated
4. A notice that actual costs could be higher, at the top ✓

Why: 12 CFR 1026.19(e)(2)(ii) requires a written, consumer-specific estimate given before the Loan Estimate to state clearly and conspicuously at the top of the front of the first page, in at least 12-point type: "Your actual rate, payment, and costs could be higher. Get an official Loan Estimate before choosing a loan." It may not look substantially like the H-24 or H-25 forms.

Source: 12 CFR 1026.19(e)(2)(ii)

How may a consumer indicate an intent to proceed after receiving the Loan Estimate?

1. Only by signing and returning the Loan Estimate itself
2. Only in writing, delivered within 3 business days
3. Any way it likes, unless the creditor requires one ✓
4. Only by paying the appraisal fee to the creditor

Why: 12 CFR 1026.19(e)(2)(i)(A) lets the consumer indicate an intent to proceed "in any manner the consumer chooses, unless a particular manner of communication is required by the creditor", and requires the creditor to document the communication under 1026.25.

Source: 12 CFR 1026.19(e)(2)(i)(A)

A loan's regular payments do not cover all the interest due. What must the Negative Amortization statement on the Closing Disclosure say?

1. That the loan is not permitted, as negative amortization is banned on all home loans
2. Only that the interest rate may change after the first year of the loan
3. That the balance will grow, likely past the original amount, cutting equity ✓
4. That the lender will forgive any unpaid interest once the loan is paid off

Why: 12 CFR 1026.38(l)(4)(i): if the regular payments do not cover all interest due, the creditor must state "that the principal balance will increase, such balance will likely become larger than the original loan amount, and increases in such balance lower the consumer's equity in the property."

Source: 12 CFR 1026.38(l)(4)

A borrower asks to see the Closing Disclosure the day before closing, while a few figures are still being finalised. What must the creditor allow?

1. Nothing, since it has already met the 3-day delivery rule
2. A copy only once every figure is finally confirmed
3. Inspection of it as far as completed, on that day ✓
4. Inspection of the seller's figures, but not her own

Why: 12 CFR 1026.19(f)(2)(i) requires the creditor to permit the consumer to inspect the disclosures, completed to set forth the items then known, during the business day immediately preceding consummation. Items relating only to the seller's transaction may be omitted.

Source: 12 CFR 1026.19(f)(2)(i)

Which of these is a "changed circumstance" that can justify a revised Loan Estimate?

1. The loan officer's discovery of a mistake in the fee calculation
2. A change in the creditor's price list for all new applications
3. The creditor deciding to switch to a more costly title insurer
4. New information about the consumer the creditor did not rely on ✓

Why: 12 CFR 1026.19(e)(3)(iv)(A) defines a changed circumstance as an extraordinary event beyond anyone's control or an unexpected event specific to the consumer or transaction; information the creditor relied on that was inaccurate or changed; or new information specific to the consumer or transaction that the creditor did not rely on. The creditor's own errors and pricing choices are none of these.

Source: 12 CFR 1026.19(e)(3)(iv)(A)