Application, Disclosures & Tolerances: practice questions

A house is being built with the loan's proceeds. What must the Loan Estimate's property tax estimate reflect?

1. Assessed value after closing, counting known improvements ✓
2. The last tax bill on the land, as the house does not yet exist
3. The sale price, multiplied by the national average tax rate
4. The appraised value of the lot alone until construction ends

Why: 12 CFR 1026.37(c)(5)(i): estimated property taxes reflect "The taxable assessed value of the real property ... after consummation, including the value of any improvements on the property or to be constructed on the property, if known, whether or not such construction will be financed from the proceeds of the transaction".

Source: 12 CFR 1026.37(c)(5)(i)

The buyer has agreed to pay a homeowners' association transfer fee at closing, and the creditor knows about it when preparing the Loan Estimate. Where does it go?

1. Under Other Costs, in the "Other" section ✓
2. Nowhere, as it is not charged by the creditor
3. Under Origination Charges, as a lender fee
4. Under Services You Cannot Shop For, as title

Why: 12 CFR 1026.37(g)(4) requires itemization under "Other" of any other amounts the consumer is likely to pay, or has contracted with someone other than the creditor or loan originator to pay, at closing and of which the creditor is aware when issuing the Loan Estimate.

Source: 12 CFR 1026.37(g)(4)

Whose contact details must appear on the Loan Estimate for the individual loan officer?

1. The branch manager's name and phone number
2. Every loan officer who worked on the file, with their NMLS IDs
3. The primary contact's name, NMLS ID, email and phone ✓
4. Only the lender's NMLS ID, no individual

Why: 12 CFR 1026.37(k)(2) requires the name and NMLSR ID of the individual loan officer "who is the primary contact for the consumer", and (k)(3) the loan officer's email address and telephone number.

Source: 12 CFR 1026.37(k)(2)-(3)

Before issuing a Loan Estimate, a loan officer tells the applicant he will not prepare one until she emails her last two pay stubs and bank statements. What does Regulation Z say?

1. He may not require verifying documents before the estimate ✓
2. He may require them, as long as the request is in writing
3. He may require pay stubs, but not the bank statements
4. He may require them if the applicant is self-employed

Why: 12 CFR 1026.19(e)(2)(iii) bars a creditor or other person from requiring a consumer to submit documents verifying information related to the application before providing the Loan Estimate. The CFPB TRID guide, section 6.8, gives the examples of a purchase contract and bank statements: the facts may be asked for orally, the documents may not be required.

Source: 12 CFR 1026.19(e)(2)(iii); CFPB TRID guide 6.8

On the Loan Estimate's Adjustable Interest Rate (AIR) Table, from when is the "First Change" month counted?

1. From the date the Loan Estimate is delivered to the consumer
2. From when interest on the first payment begins to accrue ✓
3. From the date the consumer signs the note at consummation
4. From the due date of the first scheduled periodic payment

Why: 12 CFR 1026.37(j)(5)(i): "The month when the interest rate after consummation may first change, calculated from the date interest for the first scheduled periodic payment begins to accrue, labeled 'First Change'".

Source: 12 CFR 1026.37(j)(5)(i)

After the items the rule requires to be listed first, in what order must any additional Other Costs items appear on the Loan Estimate?

1. In order of amount, largest first
2. In the order the fees were quoted
3. In any order the creditor chooses
4. In alphabetical order ✓

Why: 12 CFR 1026.37(g)(7)(ii): "All additional items must be listed in alphabetical order under the applicable subheading." (g)(7)(i) fixes the order of the initial items.

Source: 12 CFR 1026.37(g)(7)

On an adjustable-rate loan, how is the maximum principal and interest payment in the Loan Estimate's Projected Payments table worked out?

1. By assuming the maximum possible rate applies for the whole loan term ✓
2. By assuming today's index plus margin holds for the whole loan term
3. By adding the first-change cap to the rate at consummation, and no more
4. By using the average of the initial rate and the lifetime maximum rate

Why: 12 CFR 1026.37(c)(2)(i)(A): for a loan with an adjustable rate, "the maximum principal and interest payment amounts are determined by assuming that the interest rate in effect throughout the loan term is the maximum possible interest rate".

Source: 12 CFR 1026.37(c)(2)(i)(A)

A creditor has more Other Costs charges than the Loan Estimate has lines for. What must it do?

1. Total the rest on the last line as "Additional Charges" ✓
2. Attach an addendum listing each extra charge in alphabetical order
3. Leave the extra charges off the form and list them at closing
4. Split the extra charges evenly across the other lines on the form

Why: 12 CFR 1026.37(g)(8): an addendum may not be used for Other Costs items; if they cannot all be itemized in the lines provided, "the remaining charges shall be disclosed as an aggregate amount in the last line permitted ..., using the label 'Additional Charges.'"

Source: 12 CFR 1026.37(g)(8)

The borrower was allowed to shop for a survey and chose a surveyor from the creditor's written list. The surveyor is not affiliated with the creditor. Which tolerance applies to the survey fee?

1. The 10 percent cumulative tolerance ✓
2. Zero tolerance, as for a creditor fee
3. No tolerance limit at all
4. A 5 percent individual tolerance

Why: Under 12 CFR 1026.19(e)(3)(ii), a charge for a third-party service not paid to the creditor or an affiliate, where the consumer was permitted to shop and chose a provider on the creditor's list, is measured with recording fees against the 10 percent cumulative tolerance (CFPB TRID guide, section 7.6).

Source: 12 CFR 1026.19(e)(3)(ii); CFPB TRID guide 7.6

A homeowner applies to refinance her existing mortgage. Must the creditor give her the special information booklet (Your Home Loan Toolkit)?

1. Yes; every mortgage applicant must receive it
2. No; refinances are not purchase transactions ✓
3. Yes, within 3 business days of the application
4. No, unless the refinance is taken with a broker

Why: 12 CFR 1026.19(g)(1)(iii) says the booklet need not be provided for a transaction whose purpose is not the purchase of a one-to-four family residential property, including refinancings, closed-end subordinate-lien loans and reverse mortgages.

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

The borrower may choose her own title insurance agent and survey company. Under which Loan Estimate heading are those fees itemised?

1. Services You Cannot Shop For
2. Services You Can Shop For ✓
3. Taxes and Other Government Fees
4. Initial Escrow Payment at Closing

Why: 12 CFR 1026.37(f)(3) requires an itemization under "Services You Can Shop For" of settlement services the consumer can shop for under 1026.19(e)(1)(vi)(A) that are provided by persons other than the creditor or mortgage broker.

Source: 12 CFR 1026.37(f)(3)

In the Costs at Closing table on the Loan Estimate, which two headline figures are shown?

1. Loan Amount and Interest Rate
2. Finance Charge and APR
3. Closing Costs and Cash to Close ✓
4. Monthly Payment and Escrow

Why: 12 CFR 1026.37(d)(1) requires a table headed "Costs at Closing" showing "Closing Costs" (with its split into loan costs, other costs and lender credits) and "Cash to Close".

Source: 12 CFR 1026.37(d)(1)

For a federally related mortgage loan, what form must the Loan Estimate take?

1. Any form substantially similar to H-24 that the creditor designs
2. Any clear written form, provided every required figure appears
3. Form H-24 itself, in the order and layout shown in appendix H ✓
4. The creditor's own form, once approved by its state regulator

Why: 12 CFR 1026.37(o)(3)(i): for a transaction subject to 1026.19(e) that is a federally related mortgage loan, "the disclosures must be made using form H-24"; other transactions may use a substantially similar form under (o)(3)(ii).

Source: 12 CFR 1026.37(o)(3)

Which of these applicants must receive the special information booklet?

1. A homeowner taking a closed-end second mortgage
2. A homeowner refinancing to a lower interest rate
3. A buyer taking a first mortgage to purchase a duplex ✓
4. A 72-year-old homeowner taking a reverse mortgage

Why: 12 CFR 1026.19(g)(1) requires the booklet for consumers applying for credit secured by real property, and 1026.19(g)(1)(iii) exempts transactions whose purpose is not the purchase of a one-to-four family residential property, including refinancings, closed-end subordinate-lien loans and reverse mortgages. A duplex purchase is a one-to-four family purchase.

Source: 12 CFR 1026.19(g)(1)