SU # 34__RESPA and Fair Financing Laws

Question 1

What does RESPA require lenders to give to borrowers?

Answer 1

The correct figures pertaining to their closing costs.

Question 2

RESPA does not apply to what kinds of loans?

Answer 2

Reverse mortgages

Home equity loans

Loans secured by mobile homes or other dwellings that are not real property, if the dwelling is not attached to real estate.

Loans made by persons who are not considered “creditors” because they make five or fewer mortgages
per year.

Certain no-interest loans secured by subordinate liens made for the purpose of down payment, or similar home buyer assistance, property rehabilitation, energy efficiency, or foreclosure avoidance or prevention.

Question 3

What is the basic purpose of Truth in Lending- Regulation Z?

Answer 3

Give buyers information about the true cost of obtaining credit, so that borrowers can compare the costs of various lenders.

Question 4

What does ECOA prohibit?

Answer 4

Discrimination against applicants on the basis of race, color, religion, national origin, sex, marital status, age or dependency on public assistance.

Question 5

Regulation Z applies to which of these situations?

$35,000 farm loan

$50,000 restaurant loan

$75,000 condominium loan

$85,000 warehouse loan

Answer 5

$75,000 condominium loan

Question 6

What is the purpose of RESPA?

The Act is designed so title companies can compare service fees.

That home buyers understand their purchase contract.

That home buyers receive the correct figures pertaining to their closing costs.

The Act is designed so lenders can compare companies’ mortgage fees.

Answer 6

That home buyers receive the correct figures pertaining to their closing costs.

Question 7

To which of the following transactions does RESPA NOT apply?

Seller-financed loans

Residential property

First or second mortgage loans

A loan that is insured by a federal agency

Answer 7

Seller-financed loans

Question 8

Which statement is true about accepting referral fees?

It is common business practice.

It could be a law violation.

It is forbidden under all circumstances.

It is permissible in amounts under $50.

Answer 8

It could be a law violation.

Question 9

Which document is required by RESPA to detail the costs that the buyer and seller will pay at closing?

Summary of Accounts

Estimate Monthly Payments

HUD-1

Closing Disclosure

Answer 9

Closing Disclosure

Question 10

Which of the following is exempt from RESPA?

Condominium purchase

Federally-insured loan

Loan involving a second mortgage

All cash sale

Answer 10

All cash sale

Question 11

What is the title of the booklet that lenders must give to every person at the time of application for a loan?

“Your loan, your home”

“Your home loan toolkit”

“Your mortgage home loan”

“Protect your investment”

Answer 11

“Your home loan toolkit”

Question 12

During a loan interview, a lender always asks borrowers what church they attend. What law, if any, does this action violate?

RESPA

FDIC

ECOA

No laws are broken.

Answer 12

ECOA

Question 13

The purpose of the closing event is to

a. confirm that the buyer has fulfilled all contract requirements prior to title transfer immediately after closing.
b. ensure that the seller has marketable title before monies are transferred.
c. conclude the process for loan approval.
d. exchange legal title for the sale price.

Answer 13

d. exchange legal title for the sale price.

Question 14

A buyer’s financing arrangements are often concluded at closing, because

a. lenders do not fund loans unless title is being transferred.
b. the lender wants to ensure proper handling of the collateral for the loan.
c. the loan term must coincide with title transfer.
d. the deed will be held as collateral for the loan.

Answer 14

b. the lender wants to ensure proper handling of the collateral for the loan.

Question 15

The Real Estate Settlement Procedures Act prescribes closing procedures that must be followed whenever

a. a first, second, or third mortgage lien is involved.
b. the loan is to be sold to the FNMA.
c. the buyer pays all cash for the property.
d. the property is a residential complex in excess of four units.

Answer 15

b. the loan is to be sold to the FNMA.

Question 16

A sale contract stipulates that a buyer is to pay the seller’s title insurance expenses. This practice is not customary in the area. In this case,

a. the buyer and seller must amend the contract before
closing.

b. the contract is voidable, since the seller must pay the expense.
c. the buyer may pay or not pay the expense, at his or her option.
d. the buyer must pay the expense.

Answer 16

d. the buyer must pay the expense.

Question 17

A prorated expense on the settlement statement is

a. a debit to the buyer and seller
b. a credit to the buyer and seller
c. a debit and credit to the buyer and seller
d. a debit to one party and a credit to the other

Answer 17

d. a debit to one party and a credit to the other

Question 18

The amount a buyer owes at closing is equal to

a. the excess of the buyer’s debits over the buyer’s credits.
b. the excess of the buyer’s credits over the buyer’s debits.
c. the excess of the seller’s debits over the seller’s credits
d. the excess of the seller’s credits over the seller’s debits.

Answer 18

a. the excess of the buyer’s debits over the buyer’s credits.

Question 19

Which of the following are examples of closing items not prorated between buyer and seller?

a. Taxes and rents
b. Inspection fees
c. Utilities and hazard insurance
d. Condominium assessments and special assessment payments

Answer 19

b. Inspection fees

Question 20

Which of the following items are paid in arrears?

a. Taxes and insurance
b. Rents and interest
c. Taxes and interest
d. Rents and insurance

Answer 20

c. Taxes and interest

Question 21

Which of the following items are paid in advance?

a. Taxes and insurance
b. Rents and interest
c. Insurance and interest
d. Rents and insurance

Answer 21

d. Rents and insurance

Question 22

If a sale contract indicates that the day of closing is “the seller’s day,” this means that

a. the seller must pay prorated expenses inclusive of the day of closing.
b. the seller does not own the property on the day of closing.
c. the seller may elect the proration method on the day of closing.
d. the seller must pay the buyer’s portion of prorated expenses instead of the seller’s portion

Answer 22

a. the seller must pay prorated expenses inclusive of the day of closing.

Question 23

Documentary stamps are used to

a. document the procedures employed to close a transaction.
b. document the payment of a transfer tax.
c. certify that a transaction was recorded.
d. mail closing documents to principal parties after closing

Answer 23

b. document the payment of a transfer tax.

Question 24

What is the Internal Revenue Service’s Form 1099-S?

a. The buyer’s and seller’s capital gain form
b. A form that summarizes and reports transaction data from a closing
c. A form brokers must submit if the buyer or seller is a foreigner
d. A lender’s tax form showing that a loan was funded for a buyer

Answer 24

b. A form that summarizes and reports transaction data from a closing

Question 25

Assume a seller at closing must pay transfer taxes at the rate of $1.00 for every $500 of purchase price, or fraction thereof. If the sale price is $345,600, how much tax must the seller pay?

a. $69.12
b. $70.00
c. $691
d. $692

Answer 25

d. $692

Question 26

If a seller paid $488 for transfer taxes at closing, and the rate was $1.00 for every $400 or fraction thereof of the sale price, what was the sale price?

a. $195,500
b. $1,950,000
c. $195,200
d. $1,952,000

Answer 26

c. $195,200