TILA Flashcards

1
Q

What transactions are exempt from Regulation Z? (6)

However, generally exempt credit is subject to the requirements that govern the issuance of credit cards and liability for their unauthorized use. (credit cards cannot be issued on an unsolicited basis and if one is lost or stolen, the cardholder must not be held liable for more than $50 for the unauthorized used of the card).

A

Business, Commercial or Agricultural Credit

Credit extended to a non-natural person (govt agencies)

Public utility credit

Credit extended by a broker-dealer registered with the SEC involving securities or commodities accounts

Home fuel budget plans not subject to a finance charge

Certain Student loan programs.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
2
Q

Does TILA apply to credit extended to a Trust?

What about to a successor in interest?

A

Yes, credit extended to trusts established for tax or estate planning purposes or to land trusts is considered to be extended to a natural person

Yes, confirmed successor in interests are considered consumers. (confirmed by the bank/servicer)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
3
Q

True or False:
A creditor can furnish TILA disclosures to the consumer regardless if the transaction is covered by Reg. Z?

A

True.
In any event, the financial institution may routinely furnish disclosures to the consumer. Disclosure under such circumstances does not control whether the transaction is covered but can assure protection to the financial institution and compliance with the law.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
4
Q

What are the 5 coverage considerations under Regulation Z?

A

Is the purpose of the credit for personal, family, or household use?

Is the consumer credit extended to a consumer?

Is the credit extended by a creditor?

Is the credit secured by real property, a coop unit, or a dwelling?

Is the amount financed or credit limit at or below the annual threshold limit?

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
5
Q

What is the definition of a finance charge?

A

Measure of the cost of consumer credit in dollars and cents and includes:

Any charges or fees payable directly or indirectly by the consumer and imposed directly or indirectly by the financial institution either as an incident to or as a condition of an extension of consumer credit.

Does not include any charge payable in a comparable cash transaction.

ex: charges imposed by required third parties, charges by required settlement or closing agents.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
6
Q

Which credit transactions have finance charge legal accuracy tolerances?

If disclosed finance charges are legally accurate, it would not be subject to reimbursement.

A

Closed-end credit transactions permit various finance charge accuracy tolerances.

Open-end credit must be accurate since there is no tolerance for finance charge errors.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
7
Q

What is the disclosed finance charge accuracy tolerance for credit secured by real property or a dwelling?

A

The disclosed finance charge is considered accurate if its not understated by more than $100.

Overstatements are not violations.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
8
Q

What is the accuracy tolerance for Rescission rights after the 3 business day rescission period? (General rule, finance charge, and total of payments)

A

General rule: 1/2 of 1% Tolerance

Finance Charge: not understated by more than 1/2 of 1% of the credit extended or $100, whichever is greater.

Total of Payments for transactions: not understated by more than 1/2 of 1% of the face amount of the note or $100, whichever is greater.

Overstatements are not violations.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
9
Q

What is the accuracy tolerance for refinances on residential loans at a new bank? (General rule, finance charge, total of payments)

A

General rule: 1% tolerance, when new loan is made at new bank. excl: HCML

Finance Charge: not understated by more than 1% of the credit extended or $100, whichever is greater.

Total of Payments for transactions: not understated by more than 1% of the face amount of the note or $100, whichever is greater.

Overstatements are not violations.

Excludes HCMLs that are new advances or new consolidations.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
10
Q

Right to rescind. After the initiation of foreclosure on the consumer’s principal dwelling that secures the obligation, the consumer can rescind if?

A

A mortgage broker fee was not included as a finance charge or the creditor did not provide the properly completed model form from Appendix H, or a substantially similar notice or rescission.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
11
Q

What are the accuracy tolerances after the initiation of foreclosure on a consumer’s principal dwelling that secures the credit obligation?

A

Finance charge: not understated by more than $35

Total of Payments: not understated by more than $35

Overstatements are not violations.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
12
Q

What is a prepaid finance charge?

A

A prepaid finance charge is any finance charge paid separately to the financial institution or to a third party, in cash or by check before or at closing, settlement, or consummation of a transaction, or withheld from the proceeds of the credit at any time.

Ex: points, loan origination fees, inspection fees, odd days’ interest, FHA mortgage guarantee insurance fees, PMI, credit report fees (non-real estate transactions).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
13
Q

What is a precomputed finance charge?

A

A precomputed finance charge includes, for example, interest added to the note amount that is computed by the add-on, discount, or simple interest methods. If reflected in the face amount of the debt instrument as part of the consumer’s obligation, finance charges that are not viewed as prepaid finance charges are treated as precomputed finance charges that are earned over the life of the loan.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
14
Q

What charges are always included as as a finance charge? (8)

A

Interest

Transaction fees

Loan origination fees, consumer points

Credit guarantee, insurance premiums

Charges imposed on the creditor for purchasing the loan, which are passed to the consumer.

Discounts for inducing payment by means other than credit.

Mortgage broker fees

Other examples: Fee for preparing TILA disclosures, construction loan inspection fees, post-consummation tax, flood service policy, required credit life insurance charges.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
15
Q

What charges are never included as a finance charge? (8)

A

Charges payable in a comparable cash transaction.

Fees for unanticipated late payments.

Overdraft fees not agreed to in writing.

Sellers points.

Participation/membership fees.

Discounts offered by the seller to induce payment by cash or other means not involving the use of a credit card.

Interest forfeited from interest reduction by law.

Charges absorbed by the creditor as a cost of doing business.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
16
Q

What charges are not considered finance charges as long as they are a bona fide and reasonable amount? (6)

(loans secured by real estate)

A

Fees for title insurance, title examination, property survey.

fees for preparing loan documents, mortgages, and other settlement docs.

Amounts required to be paid into escrow, if not otherwise included in the finance charge.

Notary fees

pre-consummation flood and pest inspection fees

Appraisal and credit report fees.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
17
Q

What is APR?

How should it be disclosed for closed end credit?

A

APR is a measure of the cost of credit, expressed as a nominal yearly rate. It relates the amount and timing of value received by the consumer to the amount and timing of payments made.

Must be disclosed as a single rate only (regardless if the loan has a single interest rate, variable rate, or graduated payments) and it must appear with the segregated disclosures (grouped together and don’t contain any info not required under 1026.18).

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
18
Q

APR is a function of what? (3)

A

The amount financed (which is not equivalent to loan amount)

the finance charge (which is not equivalent to the total interest amount)

and the payment schedule (which is not always equal to P+I payments)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
19
Q

True or False:

APR is not an interest rate.

A

True

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
20
Q

An incorrectly disclosed APR or finance charge would NOT be considered a violation under what circumstances? (3)

A

if it was due to a calculation error from a tool used in good faith by the institution.

if the bank stops using the calculation tool after discovering the error.

if the bank notifies the CFPB in writing of the error in the calculation tool.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
21
Q

Which transactions are exempt from TRID? (3)

Which transactions have different timing requirements? (4)

A

HELOCs

Reverse Mortgages

Mortgages secured by a mobile home or a dwelling not attached to real property.

Only exempt from the timing requirements:
construction-only loans

vacant land loans

Credit extended to trusts for tax or estate planning

land loans secured by more than 25 acres.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
22
Q

Which transactions are covered by TRID?

A

TRID must be given for most closed-end transactions secured by real property or a cooperative unit.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
23
Q

When is a creditor required to mail or deliver the Loan estimate?

A

Must be mailed or delivered within 3 business days of receipt of the consumer’s loan application.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
24
Q

When is a creditor required to mail or deliver the closing disclosure?

A

Must be mailed or delivered no later than 3 business days before loan consummation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
25
Q

What is the amount financed?

What is required to be disclosed for TRID?

A

Net amount of credit extended to a consumer.

Amount financed = total of payments - finance charge.

Disclosure: itemization of the amount financed.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
26
Q

What is the amount financed from the example below?

A consumer signs a note secured by real property in the amount of $5,435. The note amount includes $5,000 in proceeds disbursed to the consumer, $400 in precomputed interest, $25 paid to a credit reporting agency for a credit report, and a $10 service charge. Additionally, the consumer pays a $50 loan fee separately in cash at consummation.

A

$4,975

The amount financed may be calculated by first subtracting all finance charges included in the note amount ($5,435 - $400 - $10 = $5,025). The $25 credit report fee is not a finance charge because the loan is secured by real property. The $5,025 is further reduced by the amount of prepaid finance charges paid separately, for an amount financed of $5,025 - $50 = $4,975.
The answer is the same whether finance charges included in the obligation are considered prepaid or precomputed finance charges.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
27
Q

What is the payment schedule?

A

All payments scheduled to repay loan principal, interest, and post-consummation finance charges.

Any finance charges paid before or at consummation is not included in the payment schedule, but is considered a pre-paid finance charge.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
28
Q

Is life-of-loan monitoring considered a finance charge?

What about flood determination fees?

A

Yes, Life of loan fees are finance charges because fees for services that will be performed periodically during the loan term are finance charges.

Determination fees are not unless a portion of the fee includes life of loan monitoring and if the bank is uncertain how to break out the fee, in which case the entire fee may be treated as a finance charge.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
29
Q

How is reg Z formatted?

Subpart A,B,C,D,E,F,G

A

A: Open end and Closed end transactions, definitions and applicability, finance charges

B:Open-end, account opening disclosures, periodic statements, special day rules

C:Closed-end credit, disclosures, treatment of credit balances, APR calculation, rescission rights, advertising.

D: record retention, non English disclosures, exemptions, rate limitations.

E: Mortgage transactions, disclosures, periodic statements, small servicer exemption

F:Private education loans, disclosures, change in terms, right to cancel, marketing

G:Credit Card, disclosures, Ability to repay, finance charges, marketing.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
30
Q

Does TILA tell banks how much interest they may charge or whether they must grant a consumer a loan?

A

No

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
31
Q

What is a successor in interest?

A

Person whom an ownership interest in a dwelling securing a closed-end credit is transferred from a consumer, provided the transfer is:

-by devise, descent, or operation of law on death of a joint tenant
-to a relative resulting from death of the consumer
-where spouse or or children become owner of the property
-from divorce, legal separation, settlement agreement, where spouse becomes the owner
-into an inter vivos trust where consumer becomes beneficiary and there are no transfer of rights of occupancy in the property.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
32
Q

When determining whether credit is for consumer purposes the creditor must evaluate all of the following? (5)

A

-purpose of credit (vacation)

-consumer’s primary occupation and how it relates to use of the credit (purchase dental supplies with dental occupation=business purpose)

-personal management of the assets purchased from the proceeds. (money borrowed to purchase stock in company but consumer does not work there=consumer purpose)

-size of the transaction. Larger more likely business purpose. ($5MM RE loan)

-amount of income derived from property acquired by the loan proceeds relative to borrowers total income. (annual salary $100k and $500 annual dividends from acquired property=consumer)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
33
Q

True or False: a checked box indicating the loan is for a business purpose is sufficient to determine the loan does not have a consumer purpose?

A

False. Absent of any documentation showing the intended use of the proceeds could be insufficient evidence that the loan did not have a consumer purpose. (could be mixed purpose)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
34
Q

Can a creditor furnish disclosures to an entity exempt from TILA?

A

Yes. Disclosures do not control if the transaction is covered but can assure protection to the financial institution and compliance with the law.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
35
Q

What must be met under the regulation in order for an entity to be considered a “Creditor”? (3)

A

-institution extends consumer credit regularly and the obligation is payable to the institution, and is in a written agreement with more than 4 installments or is subject to a finance charge.

-institution is a card issuer that extends closed-end credit that is subject to a finance charge or is payable by written agreement in more than 4 installments

-institution is not the card issuer, but imposes a finance charge at the time of honoring a credit card.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
36
Q

in what situation would regulation Z still apply if the dwelling credit has an amount financed or credit limit at or below the annual threshold limit?

A

It does not apply, but may apply later if the loan is refinanced for an amount at or below the annual threshold limit.

Also, if the principal dwelling is taken as collateral after consummation, rescission rights will apply, and in the case of open-end credit, billing disclosures and other provisions will apply.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
37
Q

What are the accuracy tolerances in a closed-end credit transaction other than a mortgage loan.

A

$5 if amount financed is less than or equal to $1,000.

$10 if amount financed exceeds $1,000.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
38
Q

How do prepaid finance charges impact the consumer?

A

They effectively reduce the amount of funds available for the consumer’s use, usually before or at the time the transaction is consummated.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
39
Q

What finance charges are included unless conditions are met? (8)

A

-Premiums for credit life, A&H, or loss of income insurance
–Unless: insurance is not required, disclosures are made, and consumer authorizes.

-Debt cancellation fees
–Unless: coverage is not required, disclosures are made, and consumer authorizes

-Premiums for property or liability insurance
–Unless: consumer selects insurance company and disclosures are made

-Premiums for Vendor’s single interest insurance (VSI)
–Unless: Insurer waives right of subrogation, consumer selects company, and disclosures are made

-Security interest charges (filing fees), insurance in lieu of filing fees, and certain notary fees
–Unless: the fee is for lien purposes, prescribed by law, payable to a third public official and is itemized and disclosed

-charges imposed by third parties
–unless: the use of the third party is not required and creditor does not retain the charge

-charges imposed by third party closing agents
–unless: creditor does not require and does not retain the fee for the particular service

-appraisal and credit report fees
–unless: charged to all applicants. Application fees may include appraisal and credit report fees, and if charges to all not a finance charge.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
40
Q

What are the finance charges in the below examples?

the APR is 12 percent on a loan with an amount financed of $5,000 and 36 equal monthly payments of
$166.07 each.

the APR is 13.26% on a loan with an amount financed of $4,500 and 35 equal monthly payments of $152.18 each and a final payment of $152.22.

A

The finance charge is $978.52 in both cases.

The APRs on these example loans are not the same because an APR does not only reflect the finance charge, it relates the amount and timing of value received by the consumer to the amount and timing of payments made.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
41
Q

When are periodic statements required to be mailed/delivered for credit card accounts?

For open-end consumer credit accounts with a grace period?

for non-credit card open-end consumer plans without a grace period?

A

At least 21 days prior to the payment due date disclosed on the periodic statement.

21 days prior to the date on which the grace period expires.

14 days prior to the date on which the required minimum periodic payment is due.

No finance charges or late fees can be charged if payment is received within the above time periods after mailing the periodic statements.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
42
Q

For open end credit which change in terms require 45 day advance written notice to consumers? (5)

A

Advanced notice is required for significant changes in terms including:

-penalty fees
-transaction fees
-fees imposed for the issuance or availability of the open-end plan.
-grace period
-balance computation method

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
43
Q

For open end credit, which changes do not require advance notice to consumers?

A

-reductions of finance charges
-termination of account due to court proceedings
-increase of APR after period of time previously disclosed in writing
-increases in variable APRs according to an index not under the card issuers control
-rate increases from consumer’s failure/ completion of hardship agreement, which terms were disclosed prior to the arrangement.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
44
Q

Can a customer reject significant changes in terms from open ended credit?

A

yes, the creditor must provide customers the right to reject the change. And if they do the creditor may not apply the change to the account.

When a customer rejects the change a creditor must not:
-impose a fee or charge, or treat the account in default as a result of the rejection
-require a repayment of the balance on the account using a method that is less beneficial to the consumer than:
–the method of payment prior to the rejection
–amort period no less than 5 years from date of rejection
–minimum periodic payment including a percentage of the balance not more than 2x the percentage included prior to the date of rejection.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
45
Q

How are finance charges disclosed for open-end credit?

A

they must be itemized. the aggregate total amount of the finance charge does not need to be disclosed.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
46
Q

What are the three methods commonly used to determine the balance to which the periodic rate is applied to open-end credit?

A

-Previous balance method
-Daily balance method
-Average daily balance method

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
47
Q

What is the previous balance method?

A

The balance on which the
periodic finance charge is computed is based on the balance outstanding at the start of the billing cycle. The periodic rate is multiplied by this balance to compute the finance charge.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
48
Q

What is the daily balance method?

A

A daily periodic rate is applied to either the balance on each day in the cycle or the sum of the balances on each of the days in the cycle. If a daily periodic rate is multiplied by the balance on each day in the billing cycle, the finance charge is the sum of the products. If the daily periodic rate is multiplied by the sum of all the daily balances, the result is the finance charge.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
49
Q

What is the average daily balance method?

A

The average daily balance is the sum of the daily balances (either including or excluding current transactions) divided by the number of days in the billing cycle. A periodic rate is then multiplied by the average daily balance to determine the finance charge. If the periodic rate is a daily one, the product of the rate multiplied by the average balance is multiplied by the number of days in the cycle.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
50
Q

For open end credit that uses 2 or more periodic rates in computing the finance charge. What must a bank disclose?

ex: one rate applies to balances up to a certain amount, another rate applied to balances above the first amount.

A

all rates and conditions
balances at which each rate applies.

Finance charge does not need to be broken into separate components based on different rates

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
51
Q

Within what range would an APR need to be considered accurate for open-end credit disclosures?

A

If it is within 1/8th of one percentage point.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
52
Q

What is the basic method for determining the APR for open end credit transactions? and when can it be used?

What is the second method for calculating the APR? and when can it be used?

A

Multiplying each periodic rate by the number of periods in a year.

This method is used in all types of disclosures and is prospective as it does not involve any particular finance charge or periodic balance.

The other is the quotient method, which can be disclosed on periodic statements for HELOCs. It reflects the annualized rate that was actually applied during the cycle. It is also known as the effective APR and may include minimum, fixed, or transactional charges to the account.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
53
Q

What if a creditor does not disclose the effective APR on a HELOC periodic statement?

A

It must instead disclose the charges (fees and interest) imposed on the account.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
54
Q

What is the equation for the basic APR method on open-end credit?

A

Monthly rate x 12 =APR

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
55
Q

What is the equation for the effective APR that may be disclosed on HELOC statements only when periodic rates are imposed?

A

Monthly rate x 12=APR

OR

(total finance charge/sum of balances) x 12=APR

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
56
Q

What is the equation for effective APR when minimum or fixed charge, but not transaction charges are imposed?

A

(total finance charge/amount of applicable balance)x12=APR

the APR cannot be determined if the applicable
balance is zero.

Loan fees, points, or similar finance charges that relate to the opening of the
account must not be included in the calculation of the APR.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
57
Q

What is the equation for effective APR when the finance charge includes a charge related to a specific transaction (cash advance fee), even if the total finance charge also include other minimum or fixed charge not calculated using a periodic rate?

A

(Total finance charge / (all balances + other amounts on which a finance charge was imposed during the billing cycle without duplication) x 12 = APR

The sum of the balances may include the average daily balance, adjusted
balance, or previous balance method.

The APR Cannot be less than the highest periodic rate applied, expressed as an APR. Loan fees, points, or similar finance charges that relate to the opening of the
account must not be included in the calculation of the APR.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
58
Q

What is the equation for the effective APR when the finance charge imposed during the cycle includes a minimum or fixed charge that does not exceed 50cents for a monthly or longer billing cycle?

A

monthly rate x 12=APR

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
59
Q

What is the equation for the effective APR when daily periodic rates are applicable if only the periodic rate is imposed or when a minimum or fixed charge but not transactional charges is imposed?

A
  1. (Total finance charge / average daily balance) x
    12 = APR

Or

  1. (Total finance charge / sum of daily balances) x
    365 = APR
How well did you know this?
1
Not at all
2
3
4
5
Perfectly
60
Q

If a bank changed any terms on a HELOC, when would they need to disclose/notify customers?

A

15 days advanced written notice of change in terms or when the minimum periodic payment increases.

But notice is not required if the change involves a reduction to any component of a finance charge or other charge or is the result of a court preceding.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
61
Q

If a creditor prohibits additional extensions of credit or reduces the credit limit on a HELOC, when must they notify the customer? and what must the notice contain?

A

3 business days after the action is taken and must include the specific reasons for the action. Also must include if the creditor requires the consumer to request reinstatement of credit privileges.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
62
Q

If the administrator of a trust request the amount of the balance on open-end credit, what is the creditor required to do and what are they prohibited from doing?

A

• The issuer is prohibited from imposing additional fees on the account;
• The issuer is required to disclose the amount of the balance to the administrator in a timely manner (safe harbor of 30 days); and
• If the balance is paid in full within 30 days after disclosure of the balance, the issuer must waive or rebate any trailing or residual interest charges that accrued on the balance
following the disclosure.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
63
Q

When must payments be credited to an account for open end credit?

A

As of the date of receipt, except when a delay in crediting will not result in a finance or other charge.

if they fail to credit in time to prevent a charge the creditor must adjust the customers account so charges are credited back to the consumer during the next billing cycle.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
64
Q

What if a credit card issuer changes the address for receiving payments or procedures for handling payments and such changes cause a material delay in the crediting of a payment to the consumers account?

A

the card issuer may not impose any late fees or charges for late payment during the 60 day period following the date the change took effect.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
65
Q

A billing error notice for open end credit is a written notice from a consumer that: (3)

A

• Is received by a creditor at the address disclosed under 12 CFR 1026.7(a)(9) or (b)(9), as applicable, no later than 60 days after the creditor transmitted the first periodic statement that reflects the alleged billing error;
• Enables the creditor to identify the consumer’s name and account number; and
• To the extent possible, indicates the consumer’s belief and the reasons for the belief that a billing error exists, and the type, date, and amount of the error.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
66
Q

What must a creditor do in response to a billing error notice for open end credit?

A

The creditor shall mail or deliver written acknowledgment to the
consumer within 30 days of receiving a billing error notice, unless the creditor has complied with the appropriate resolution
procedures within the 30 day period.

And must comply with the resolution procedures within two complete billing cycles but no later then 90 days after receiving the notice.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
67
Q

Until a billing error (open-end) is resolved, the following rules apply: (3)

A

-customer need not pay any portion any portion of payment related to the disputed portion of the bill. (creditor cannot try to collect the disputed portion, but can collect any undisputed portion, can reduce the credit limit for the disputed portion, can reflect the PENDING disputed portion and charges on a periodic statement)

-creditor is prohibited from making an adverse report on the consumer credit standing.

-creditor shall not accelerate any part of the consumers indebtedness or restrict or close the account because of the report.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
68
Q

If a creditor determines that a billing error occurred as asserted (open end), it must within the applicable time limits: (2)

A

• Correct the billing error and credit the consumer’s account with any disputed amount and related finance or other charges, as applicable; and
• Mail or deliver notification of the correction to the
consumer.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
69
Q

If, after conducting a reasonable investigation, a creditor determines that no billing error occurred (open-end) or that a different billing error occurred from that asserted, the creditor must within the applicable time limits: (3)

A

• Mail or deliver to the consumer an explanation that sets forth the reasons for the creditor’s belief that the billing error alleged by the consumer is incorrect in whole or in part;
• Furnish copies of documentary evidence of the consumer’s indebtedness, if the consumer so requests; and
• If a different billing error occurred, correct the billing error and credit the consumer’s account with any disputed amount and related finance or other charges, as applicable.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
70
Q

What must be disclosed on periodic statements for credit card accounts regarding minimum payments? (3)

A

-estimate of amount of time and total cost (P&I) involved in paying the balance in fully by making the minimum payment

-estimate of the monthly payment amount required to pay off the balance in 36 months and total cost (P&I) of repaying in that time.

-disclose a minimum payment warning and estimate of total interest consumer would save if they repaid the balance in 36 months instead of making minimum payments.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
71
Q

If an advertisement for open end credit states specific credit terms, it must state only those terms that actually are or will be arranged or offered by the creditor. If any finance charges or other charges are set forth in an advertisement, the advertisement must also clearly and conspicuously state the following: (3)

A

-any minimum, fixed, transaction, activity or similar charge that is a finance charge

-any periodic rate that may be applied expressed as an APR. and if the rate is variable

-any membership or participation fee that could be imposed

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
72
Q

True or false: it is deceptive to advertise that a credit card rate is fixed if the rate is actually variable?

A

True, this would be considered a deceptive or misleading practice and is banned.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
73
Q

In advertisements for HELOCs, if any finance charges or other charges or payment terms are included in the ad, then the ad must also include? (3)

A

-any loan fee that is the percentage of the credit limit under the plan and an estimate of any other fees imposed for opening the plan (dollar amount or range)

-any periodic rate used to compute the finance charge expressed as an APR

-max APR that may be imposed in a variable rate plan.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
74
Q

If a loan subject to TRID is a purchase transaction, what must be provided within 3 business days of receipt of the consumers application?

A

The special information booklet, along with the standard requirement of the LE.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
75
Q

What are the timing requirements and what disclosures must be provided for reverse mortgages under TRID?

A

Disclosures must be mailed or delivered no later than the 3rd business day after receiving a written loan application.

Must provide the good faith estimate, HUD-1 settlement statement, and other TILA disclosures

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
76
Q

What are the timing requirements and what disclosures must be provided for Chattel dwelling loans under TRID?

A

disclosures must be provided prior to consummation of the loan.

TIL disclosures (GFE and HUD 1 not required)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
77
Q

Can TRID disclosures contain estimates?

A

Yes if the information required is unknown, the creditor can provide a reasonable estimate, but the disclosure must clearly mark that this is an estimate.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
78
Q

What are the disclosure requirements for variable rate closed end loans subject to TRID? (4)

A

-disclosures must be provided for the full term of the loan and must be based on the terms in effect at the time of consummation.

  • if the transaction includes a seller or consumer buy down, the disclosed APR should be a composite rate based on the lower rate for the buy down period and the rate that is for the remainder of the term.

-if the initial rate is not determined by the index/formula used for later rate adjustments, the disclosed APR must reflect a composite rate based on the initial rate for as long as its applied and the fully indexed rate for the remainder of the term.

-if the initial interest rate is set according to index/formula used for later adjustments but set before consummation, disclosures should be based on the initial interest rate, even though the index may have changed by consummation.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
79
Q

What are the primary disclosures required under TRID for dwelling secured loans? (4)

A

-finance charge
-amount financed
-payment schedule (total of payments)
-APR

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
80
Q

If a consumer pays for a charge separately in cash (this charge is not in the note amount or finance charge) then should it be included in the amount financed for a TRID Loan?

A

No it should be subtracted out and is not required to be disclosed.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
81
Q

If a creditor includes amounts beyond the amount financed and finance charge (RE escrow taxes) in the payment schedule for a RE TRID loan, how should the APR be disclosed?

A

When calculating the APR, the creditor must disregard such amounts.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
82
Q

If the obligation is a renewable balloon payment instrument that unconditionally obligates the financial institution to renew the short-term loan at the consumer’s option or to renew the loan subject to conditions within the consumer’s control, the payment schedule must be disclosed how?

A

If the obligation is a renewable balloon payment instrument that unconditionally obligates the financial institution to renew the short-term loan at the consumer’s option or to renew the loan subject to conditions within the consumer’s control, the payment schedule must be disclosed using the longer term of the renewal period or periods. The loan must be disclosed with a variable rate feature.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
83
Q

The APR must be calculated using one of the following ways?(2)

A

-actuarial method
-U.S Rule (accrual method)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
84
Q

What is the accuracy tolerance for an APR on regular closed end transactions? (single advance transactions with equal payment periods or an irregular first or last payment)

A

If the disclosed APR is within 1/8th of 1 percentage point of the APR calculated

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
85
Q

What is the accuracy tolerance for an APR on irregular closed end transactions? (multiple advance transactions)

A

If the disclosed APR is within 1/4 of 1 percentage point of the APR calculated.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
86
Q

What is the accuracy tolerance for an APR on mortgage transactions? (4)

A

-If the disclosed APR is within 1/8th of 1 percentage point of the APR calculated

-if the rate results from a disclosed finance charge that is considered accurate or accurate for purposes of rescission

-if the rate results from a disclosed finance charge that is understated and the disclosed APR is also understated but is closer to the actual APR

-If the rate results from a disclosed finance charge that is overstated and the APR is also overstated but is closer to the actual APR

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
87
Q

Is the the disclosed APR considered accurate in the following example?

actual APR is 9%
disclosed APR is 8.65%
rate is considered accurate at 8.5% due to the omission of $75 from the finance charge. (special mortgage rules 1026.22(a)(4))

What if the disclosed APR was 8.4% or 9.3%?

A

Yes the disclosed APR is considered accurate as the rate is considered accurate at 8.5%. However a disclosed APR below 8.5% or above 9.25% would not be considered accurate.

The tolerance is 1/4th of 1 percentage point for irregular transactions.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
88
Q

For construction only and construction to permanent loans can the APR be estimated?

How should the advances be disclosed?

A

Yes based on information reasonably available at the time of disclosure.

the advance of funds can be disclosed either separately or together. if the loan is construction to perm and will be funded by the same creditor the construction phase and permanent phase can be treated as one or more transactions. (this choice impacts calculations)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
89
Q

What is an interest reserve?

is an interest reserve considered a prepaid finance charge?

A

in a multiple advance construction loan, a creditor may establish an “interest reserve” to ensure that interest is paid as it accrues by designating a portion of the loan amount for that interest payment purpose.

Not a prepaid finance charge.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
90
Q

What are the disclosure requirements for interest reserves in construction or construction to perm loans?

A

If a creditor requires the establishment of an interest reserve and automatically deducts interest payments from the reserve amount rather than allow the consumer to make interest payments as they become due, the fact that interest will accrue on those interest payments as well as the other loan proceeds must be reflected in the calculations and disclosures.

The creditor can use the formula in Appendix D

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
91
Q

For a construction to perm loan, how should a creditor disclose fees and charges if they choose to disclose multiple transactions?

A

The construction loan must have allocated finance charges, points, and fees that would not be imposed on the other transactions. The amounts must be disclosed for the construction phase.

Points finance charges and fees for the permanent phase must be separate from the construction phase and vice versa. They should be allocated to the phase in which they are charged.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
92
Q

How should a creditor disclose this:

charges an origination fee for construction financing only, but charges a greater origination fee for construction-perm financing.

A

the difference between the two fees must be allocated to the permanent phase. All other finance charges, points, fees must be allocated to perm phase. Fees and charges not used to compute the finance charge, points, or fees may be allocated between the transactions in any manner the creditor chooses.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
93
Q

True or false: TILA requires the use of one method of interest computation.

A

False: The reg does not require you use 360 or 365 when calculating interest. I t does however allow creditors to disregard that months have different number of days when calculating and making disclosures.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
94
Q

Can creditors calculate disclosures based on a 360 day year with 30 day months even if they collect interest by applying a factor of 1/365 of the annual interest rate to the actual days?

A

Yes, creditors can base their disclosures on calculation tools that assume all months have an equal number of days even if the practice is different.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
95
Q

Can creditors apply daily interest factors to a loan based on a 360 day year to the actual number of days between payments. Without disclosing so?

A

No this would be a violation. if the creditor must disclose the higher values of the finance charge, the APR , and the payment schedule resulting from this practice.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
96
Q

Is this a violation?

APR disclosed at 12%
Finance charge disclosed is $1,200 (.12 x 10M)
Daily rate is .033333 (simple interest/360)
No charges imposed except interest
amount financed is the same as the loan amount, applying a daily rate on a daily basis for a 365 day year on a $10M one year single payment unsecured loan.

A

Yes

APR calculated is 12.17% (.033333 x 365 = .121667)
Finance charge calculated is $1,216.67 (.121667 x 10M=1216.67)

However, if there are no other charges except interest, the application of a 360-day year daily rate over 365 days on a regular loan would not result in an APR in excess of the one eighth of one percentage point APR tolerance unless the nominal interest rate is greater than 9 percent. For irregular loans, with one-quarter of 1 percentage point APR tolerance, the nominal interest rate would have to be greater than 18 percent to exceed the tolerance.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
97
Q

Is a required deposit as a condition of credit considered a finance charge?

does it need to be reflected in the APR?

A

The effect of a required deposit is not reflected in the APR. Also, a required deposit is not a finance charge since it is eventually released to the consumer. A deposit that earns at least
5 percent per year need not be considered a required deposit.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
98
Q

What loan types are exempt from TRID? (5)

What disclosures do they get instead?

A

-Reverse mortgages
-HELOCs
-Chattel dwelling loans
-Dwellings not attached to real property
-loans made by a creditor who makes 5 or fewer loans a year

They get the GFE, HUD-1, and Servicing disclosures under TILA or RESPA.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
99
Q

What loan types are exempt from the requirement to provide the GFE, HUD-1, and servicing disclosures?

A

-TRID subject loans (closed end loans secured by real property/cooperative units)

-Certain no-interest loans secured by subordinate liens for the purpose of down payment assistance, homebuyer assistance, rehabilitation assistance, energy efficiency assistance, or foreclosure prevention.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
100
Q

Can a creditor use the TRID disclosures in lieu of the GFE, HUD-1, and servicing disclosures for TRID exempt loans?

A

No the TIL and RESPA forms are required for those loans.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
101
Q

What loan types are subject to TRID?

A

Most closed-end mortgage loans including

-construction only loans
-loans secured by vacant land or by 25 or more acres.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
102
Q

What disclosures must be provided for TRID loans? (4)

A

-Loan Estimate
-Closing Disclosure
-Special information booklet
-CHARM booklet for ARM loans

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
103
Q

When is the loan estimate required to be provided?

A

Within 3 business days after receiving the application and no later than 7 business days before consummation (placed in the mail date counts)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
104
Q

What is an application as defined by TRID? (6)

A

-consumers name
-consumers income
-SSN for credit report
-property address
-estimated value of property
-loan amount requested

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
105
Q

When are the timing requirements triggered for providing the loan estimate?

A

As soon as the bank receives the 6 pieces of information to be considered an application.

This does not necessarily mean the applicant has to have completed the written application form for the bank.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
106
Q

What if the creditor determines within the 3 business day period that the consumers application will not be approved, or if the consumer withdrawals within that 3 day period? Do they still have to provide the LE?

A

No they do not. However, if it does not provide the LE and later consummates the transaction on the terms originally applied for, then they will be in violation.

if a consumer amends an application and is approved, the LE is required within 3 business days of the amended application.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
107
Q

What is a business day for purposes of the LE?

A

day on which the creditor’s offices are open to the public for carrying out substantially all of its business function.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
108
Q

What is a business day for the closing disclosure?

This applies to most other timing requirements under TRID.

A

Calendar days except Sundays and public holidays.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
109
Q

Is the LE still required in 3 business days if some information is not reasonably available at the time the LE is made?

A

Yes, because a creditor can use estimates even if more precise info will be available later.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
110
Q

Can a consumer waive the 7 bus day waiting period?

if so, When?

A

Yes, if the loan is needed to meet a bona fide personal financial emergency.

Consumer must proved a dated written statement describing the emergency, they they waive the waiting period, and is signed by all applicants.

ex: imminent sale of home due to foreclosure

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
111
Q

What charges are considered Zero Tolerance? (2)

These charges cannot exceed the amount disclosed on the LE unless a revised LE was provided.

A

-Fees for required services
-Fees paid to an unaffiliated third party if they could not shop for a third party, settlement service, or transfer taxes.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
112
Q

What charges are considered 10% cumulative tolerance? (2)

The creditor may charge the consumer more than disclosed on the LE as long as the sum total of the charges does not exceed 10% of the sum disclosed.

A

-recording fees
-charges for third party services if:
–the charge is not paid to the creditor or affiliate, and
–the consumer is permitted to shop for the service

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
113
Q

What charges have variances that are permitted without tolerance limits?

Can charge more than the amount disclosed on the LE, but only if the disclosed charge was based on the best information available at the time of disclosure.

A

-Prepaid interest
-Property insurance premiums
-amounts placed in escrow, impound, reserve or similar account

-charges paid to third party service providers for services required by the creditor if the consumer can shop and selects a provider not on the provider list

-Property taxes, other charges paid to third party service providers for services not required by the creditor.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
114
Q

When is a list of service providers required to be provided?

What is required to be on the list?

A

If a consumer is permitted to shop for a settlement service the creditor must provide this list no later than 3 business days after receiving the application.

The list must:
-identify at least one available settlement service provider for each service.
-state that the consumer may choose a different provider for the service.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
115
Q

Can a revised list of service providers be issued to consumers?

A

Yes a creditor may issue a revised list when a settlement service is added as a result of a reason provided under 1026.19(e)(3)(iv)

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
116
Q

What if the amounts paid by the consumer at closing exceed the amounts disclosed on the LE beyond the tolerance allowed?

A

Then the excess must be refunded within 60 calendar days after consummation:

zero tolerance-any amount excess must be refunded

10% tolerance - the excess of the sum amount must be refunded.

How well did you know this?
1
Not at all
2
3
4
5
Perfectly
117
Q

Can a creditor provide a revised LE for informational purposes?

A

Yes

118
Q

In what circumstances can a creditor provide a revised LE to reset tolerances? (6)

A

-Changed circumstances causing increased settlement charges above tolerances (ex: natural disaster adds closing costs due to damages, title insurer goes out of business so estimate no longer valid, new information provided that was not relied on at time of disclosure.)

-Changed circumstances that affect the consumers eligibility for the terms applied or for the value of the security for the loan. This in turn results in increased cost for settlement services beyond the tolerances. (ex: underwriting determines annual income is less than listed on app, co applicants where combined income was used to approve the loan but one borrower subsequently becomes unemployed.

-revisions requested by the customer (consumer grants power of attorney to consummate the transaction resulting in a new fee)

-rate locks after initial LE (rate lock changes interest dependent fees/terms)

-expiration of the LE
-construction loans

119
Q

When must a revised LE be provided after a rate lock?

What if the rate lock is on or after the closing disclosure is provided?

A

Within 3 business days after the interest rate is locked

A corrected CD must be provided at or before consummation.

120
Q

When does a LE expire?

A

if the customer does not indicate an intent to proceed within 10 business days (or any additional days provided by the creditor) after the LE was delivered/mailed

121
Q

When can a revised LE be provided for Construction loans?

A

If the loan involves financing of new construction and the creditor reasonably expects the settlement will occur more than 60 calendar days after the LE was provided

And if the LE clearly stated that any time prior to the 60 days the creditor may issue revised disclosures.

122
Q

Are creditors permitted to provide revised LEs for technical errors, miscalculations, or understatements of charges?

A

No these are not reasons for which creditors are permitted to provide revised LEs

123
Q

When must a creditor provide a revised LE for any of the permitted reasons?

A

Within 3 business days after receiving the info sufficient to establish that one of the permitted reasons has occurred.

124
Q

Can a creditor provide a revised LE on or after the creditor has provided the closing disclosure?

A

No, instead the creditor may used the initial or a corrected closing disclosure to reset tolerances provided the reason is permitted.

125
Q

Can a creditor impose a fee on consumer in connection with an application under TRID?

A

It depends.

A fee cannot be imposed until the consumer has received the LE and has indicated intent to proceed.

126
Q

What types of fees are restricted from being charged if the borrower has not received the LE or given intent to proceed?

What fees are allowed by exception?

A

-application fees
-appraisal fees
-underwriting fees
-other fees

The only exception to this exclusion is for a bona fide and reasonable fee for obtaining a credit report

127
Q

How can intent to proceed be documented for TRID?

A

One of the following ways unless the creditor requires a specific means of communication:

-Oral in person after LE delivery
-Oral over phone, email, signing a pre-printed form after receipt of the LE

128
Q

Is a consumers silence indicative of intent to proceed?

A

NO

129
Q

Can a creditor provide estimated terms to the consumer prior to the consumer receiving the LE?

A

Yes if at the top of the front page of the written estimate in 12 pt font it reads:

Your actual rate, payment, and costs could be higher. Get an official Loan Estimate before choosing the loan.

The written estimate cannot look like an LE or CD.

130
Q

Can a creditor condition providing the LE on a consumer submitting documents verifying the information related to the mortgage loan application?

A

NO

131
Q

When is a creditor required to provide the closing disclosure?

A

The customer must receive the CD no later than 3 business days before consummation of the loan.

132
Q

If a creditor mails the CD 6 business days prior to consummation, can you assume it was received on time?

A

Yes you can assume it was received 3 business days after sending.

133
Q

Can a creditor use estimates on the CD?

A

Yes as long as they use the best information reasonably available and act in good faith and use due diligence in obtaining the info.

However, the creditor must provide a corrected disclosure containing the actual terms at or before consummation.

134
Q

When must a creditor provide a corrected CD?

A

if any of the terms or costs of the transaction change prior to consummation. It must be corrected to contain the actual terms of the transaction.

It must be provided at or before consummation unless the correction requires a new waiting period.

135
Q

In what circumstance would there be a new waiting period from issuing a corrected CD? and what is the waiting period?

A

The creditor must provide the consumer with an additional 3business day waiting period prior to consummation if the APR becomes inaccurate, the loan product changes, or a prepayment penalty is added to the transaction.

136
Q

When is Consummation under TRID?

A

It occurs when the consumer becomes contractually obligated to the creditor on the loan, not when the consumer becomes contractually obligated to a seller in a RE transaction. This timing depends on state law

137
Q

When must the creditor provide the CD for timeshare transactions?

A

No later than consummation.

138
Q

In a transaction with multiple consumers, who should the creditor provide the CD to?

A

In non rescindable transactions, It may be provided to the consumer with primary liability.

In rescindable transactions, the creditor must provide the CD separately and meet the timing requirements for each consumer who has the right to rescind.

139
Q

Can a creditor use a mortgage broker or settlement agent to provide disclosures under TRID?

A

Yes as long as there is a contract and provided the third party complies with all relevant requirements for content, timing, and accuracy of the disclosures.

However, the creditor is still legally responsible for any errors or defects.

140
Q

What is the three day waiting period for TRID loans?

A

a loan may not be consummated less than 3 business days after the CD is received by the consumer.

However, this waiting period can be waived if the consumer has a bona fide personal financial emergency and requests to waive the waiting period.

141
Q

What is an average charge under TRID?

A

In general, the amount imposed on the consumer for any settlement service must not exceed the amount
the settlement service provider actually received for that service.

However, an average charge may be imposed instead of the actual amount received for a particular service, as long as the average charge satisfies the required conditions

142
Q

What are the conditions that must be satisfied to allow an average charge to be imposed? (4)

A

-charge is no more than the average amount paid for the service by or on behalf of all consumers and sellers for a class of transactions

-creditor or settlement service provider defines the class based on period of time, geographic area, and loan type

-they use the same average charge for every transaction in the class

-do not use the average charge for insurance, charge based on the loan amount or property value, or if doing so is otherwise prohibited

143
Q

What are the three categories of changes that require a corrected Closing disclosure?

A

-changes before consummation that require a new waiting period

-changes before consummation that do not require a new waiting period

-changes that occur after consummation.

144
Q

What changes before consummation would require a new waiting period?

A

If one of the following occurs after the original CD was provided and before consummation:

-Disclosed APR becomes inaccurate (if APR and finance charge are overstated because the interest rate decreased, APR is considered accurate and no new waiting period)

-The loan product changes

-Prepayment penalty is added

The updated CD must be provided within 3 days before consummation (new waiting period)

145
Q

In what circumstance would a creditor need to provide a new CD after consummation?

Any exceptions?

What are the timing requirements?

A

If an event in connection with the settlement occurs during the 30 calendar day period after consummation that caused the CD to be come inaccurate and results in a change in the amount paid by the customer.

Exception if the only changes were to per-diem interest. A corrected CD is not required in this case unless the change impacted more than per diem interest, then those changes and the per diem interest changes would need to be re disclosed.

Must be provided no later than 30 calendar days after receiving info sufficient to establish an event has occurred.

146
Q

When must a creditor provide a corrected CD due to non-numerical clerical errors?

A

No later than 60 calendar days after consummation.

An error is clerical if it does not affect a numerical disclosure, timing, delivery, or other requirements.

147
Q

How can a creditor cure a tolerance violation under TRID?

A

if the bank self identifies a tolerance violation, they can cure it by providing a refund to the consumer and providing a corrected CD that reflects the refund no later than 60 calendar days after consummation.

148
Q

What is the special information booklet, and in what circumstance must it be provided?

A

This is known as the home buying information booklet (your home loan toolkit: a step by step guide). Helps mortgage applicants understand the nature and cost of RE services.

And must be provided for loans using the LE and CD forms and is generally required for all consumer credit transactions secured by real property.

149
Q

In what circumstances does the creditor not need to provide the special information booklet for RE secured loans?

A

If the consumer is applying for a HELOC, they can provide the “what you should know about HELOCs” brochure

-or if the the consumer is applying for a RE transaction that does not have a purpose of purchasing a 1-4 family. (Refinancing, closed end subordinate lien, reverse mortgage)

150
Q

When must a creditor provide the special information booklet?

A

No later than 3 business days after receiving the consumer’s loan application

Unless the creditor denies the application or the consumer withdraws before the end of the 3 day period.

151
Q

What are the requirements for providing the special information booklet if there are multiple applicants?

A

The creditor may provide a copy to just one of them

152
Q

Are creditors allowed to make changes to the special information booklet or provide their own version?

A

no they are required to provide the one by the CFPB and can only make limited changes.

They should however insure they are always providing the most updated version of the booklet.

153
Q

Are creditors required to comply with TRID for disclosure of construction loans?

A

Yes as long as they are secured by real property or a cooperative unit.

154
Q

What are the two phases of a construction loan?

A

The first phase usually is an interest only period with several disbursements of funds until the construction is completed. Usually construction only loans the obligation is paid at this point.

If not then it is a construction to perm and it enters the second phase, where permanent financing is amortized as a standard mortgage transaction.

155
Q

For construction loans, can a series of advances be considered as one transaction under TRID?

What about for construction to permanent loans?

A

Yes as long as the agreement specifies up to a certain amount. In this case the bank can treat and disclose all advances as one transaction or as multiple.

The same is true for construction to perm loans. they can be treated and disclosed as one or two transactions.

156
Q

In a transaction that finances a dwelling that may be permanently financed by the same creditor, the construction financing phase and the permanent financing phase can be disclosed in what 3 ways?

A

-as a single transaction, with one disclosure combining both phases

-as 2 separate transactions, one disclosure each phase

-as more than 2 transaction, with one disclosure for each advance and one for the perm phase.

157
Q

What are the timing requirements for LE disclosures for Construction loans?

A

The same, within 3 business days of receiving the application and not later than 7 business days before consummation.

However, this would depend on if the bank is disclosing the applications as one transaction or multiple.

Ex: if the creditor receives an application for construction financing on one day and perm financing on another day, or if both are received on the same day.

158
Q

What are creditors required to provide to consumers applying for a closed end loan not subject to TRID?

A

The TIL disclosure.

ex: specified housing assistance programs for LMI loans not secured by real property like mobile home loans.

159
Q

What does the TIL disclosure include?

A

Payment schedule that must

-reflect all components of the finance charge. (amount financed, finance charge, APR, schedule of payments, etc. )
-all payments scheduled to repay principal
-interest
-any other finance charge payable by the consumer after consummation.

160
Q

Does the payment schedule, which is part of the TIL disclosure, include finance charges paid before or at consummation? (eg. odd days interest)

A

No these are considered prepaid finance charges and are not part of the payment schedule. They only are reflected as a deduction in the amount financed.

161
Q

Can the payment schedule, which is part of the TIL disclosure, include components beyond the amount financed and finance charge? (eg. insurance premiums, escrow taxes)

A

Yes these can be included at the creditors option, but when calculating the APR the creditor must disregard such amounts.

162
Q

Disclosures for variable rate loans must be given for what term of the transaction and what time period are disclosures based off of?

A

Disclosures must be given for the full term of the transaction and must be based on the terms in effect at the time of consummation.

163
Q

When must a creditor/servicer provide a consumer with an ARM adjustment notice after the initial rate changes (rate did not change payment amount)?

What if the first rate adjustment is less than a year from consummation?

A

They must provide the individual disclosure between 210 and 240 days before the first payment at the adjusted rate is due.

If the first payment at a new rate is due within the first 210 days after consummation, the creditor must provide the rate change disclosure at consummation.

164
Q

Can a creditor provide the rate adjustment notice to consumers with estimates of the new rate?

A

Yes if the new rate is unknown, the creditor can provide an estimate, but the notice must mention that its an estimate and it must be based on the index within 15 business days prior to the date of the disclosure.

165
Q

What types of loans are applicable to receiving rate change notices after consummation?

A

ARMs secured by the consumers principal dwelling with terms of more than a year.

166
Q

What is the rate change (no payment change) notice required to disclose?

A

1026.20(d)

167
Q

When must the rate change disclosures be provided for ARMs where the payment changes along with a rate change?

A

between 60-120 days before the first payment at the new amount is due.

168
Q

When must the rate change disclosures be provided for ARMs where the payment changes in connection with a uniformly scheduled rate change occurring every 60 days or more frequently?

A

Between 25-120 days before the first payment at the new amount is due.

169
Q

When must the rate change disclosure be provided for ARMs originated prior to January 10, 2015, in which
the contract requires the adjusted interest and payment to be calculated based on an index that is available on a date less
than 45 days prior to the adjustment date?

A

Between 25-120 days before the first payment at the new amount is due.

170
Q

When must the rate change disclosures be provided for ARMs where the first adjustment occurs within 60 days of consummation and the new interest rate disclosed at the time was an estimate?

A

As soon as practicable but no less than 25 days before the first payment at the new amount is due.

171
Q

What must the disclosures contain for a rate and payment change to an ARM loan?

A

1026.20 (c)

172
Q

What is the following considered:

When an obligation is satisfied and replaced by a new obligation to the original financial institution (or a holder or servicer of the original obligation) and is undertaken by the same consumer

are disclosures required in this situation?

A

A refinancing

and yes a complete set of new disclosures is required in this situation.

173
Q

What must the disclosure include on a refinance regarding the previous obligation finance charge?

A

The finance charge on the new disclosures must include any unearned portion of the old finance charge that is not credited to the exiting obligation.

174
Q

What transactions are not considered a refinance even if the existing obligation is satisfied an replaced by a new obligation? (5)

A

-renewal of an obligation with a single payment of P&I or with periodic interest payments and a final payment of principal with no change in the original terms.

-An APR reduction with a corresponding change in the payment schedule

-an agreement involving a court proceeding

-change in credit terms resulting from a consumers default or delinquency

-renewal of optional insurance purchased by the consumer and added to an existing transaction, if required disclosures were provided for the initial purchase of insurance.

175
Q

If the refinance is not accomplished by the cancellation of the old obligation and substitution of a new one, a new transaction subject to new disclosures results if the creditor? (2)

A

-increases the rate based on a variable rate feature that was not previously disclosed

-adds a variable rate feature to the obligation.

176
Q

If at the time a loan is renewed, the rate is increased, is the increase considered a variable rate feature?

A

No this is just the cost of renewal as long as the new rate remains fixed during the remaining life of the loan.

177
Q

Are new disclosures required if the original debt is not cancelled in connection with a loan renewal?

A

No this is not considered a refinance.

178
Q

Is changing the index of a variable rate transaction to a comparable index considered adding a variable rate feature?

A

no

179
Q

What is the escrow closing notice?

A

Before cancelling an escrow account, an escrow closing notice must be provided to any consumers for whom an escrow account was established in connection with a closed-end consumer credit transaction secured by a first lien on a real property or dwelling, except reverse mortgages.

180
Q

What are the two exceptions to providing an escrow closing notice?

A

-if the escrow account that is being canceled was established in connection with the consumers delinquency or default on an underlying debt obligation.

-if the underlying debt obligation for which the escrow account was established is terminated through repayment, refinancing, rescission, or foreclosure.

181
Q

What are the timing requirements for providing an escrow closing notice if the borrower requests the cancellation?

A

The creditor or servicer must ensure the consumer receives the notice no later than 3 business days before the account is canceled.

182
Q

What are the timing requirements for providing the escrow closing notice if the account is cancelled by the creditor without request from the borrower?

A

They must ensure the customer receives the notice no later than 30 business days before the closure of the account.

183
Q

What must the escrow closing notice disclose?

A

(12 CFR 1026.20(e)(1)-
(2)):

184
Q

What are the requirements if an advertisement for closed end credit states specific credit terms?

A

It must only state those terms that actually or will be arranged or offered by the creditor.

The disclosure must be made clearly and conspicuously.

185
Q

What is required to meet the closed end advertising requirements that disclosures must be made clearly and conspicuously?

what about for dwelling secured credit ads?

A

To meet this standard in general, credit terms
need not be printed in a certain type size nor appear in any particular place in the advertisement.

For advertisements for credit secured by a dwelling, a clear and conspicuous disclosure means that the required information is disclosed with equal prominence and in close proximity to the advertised rates or payments triggering the required disclosures.

186
Q

If an ad for closed end credit states a rate of finance charge is must disclose?

A

The rate as an “annual percentage rate”. If it could increase after consummation, the ad must state that.

187
Q

Can ads for credit not dwelling secured list other rates besides the APR (interest rate)?

What if the credit is dwelling secured?

A

The ad must not state any other rate, except that a simple annual rate or periodic rate that is applied to an unpaid balance may be stated in conjunction with but not more conspicuously than the APR.

dwelling secured: It may not state a periodic rate, other than a simple annual rate, that is applied to the unpaid balance. The rate cant be more conspicuous than the APR.

188
Q

What are the triggering terms for closed end credit ads that required additional disclosures? (4)

A

-amount/% down payment
-amount/% any payment
-amount/% finance charge
-number of payment or period of repayment

189
Q

What must closed end credit ads state if it contains a triggering term? (3)

A

-amount/% of Down payment
-terms of repayment over full term of the loan including balloon payments
-the “annual percentage rate”, and if the rate may increase after consummation.

190
Q

What is required to be states for ads for the following: (3)

Ads for dwelling secured credit, other than radio or TV ads, that sate a simple annual rate of interest and more than one simple annual rate of interest will apply over the term of the advertised loan

A

-each simple rate of interest that will apply. In variable rate transactions, a rate determined by adding an index and margin must be disclose based on current info

-period of time during which each simple annual rate of interest will apply

-APR of the loan

191
Q

What 7 deceptive or misleading acts or practices are prohibited in advertisements for closed-end mortgage loans?

A

-Stating rates or payments for loans are “fixed” when they are not and are not disclosed as being fixed for only a limited period of time

-making comparisons between actual or hypothetical credit payments or rates when they are not available for that product or for the full term of the loan.

-endorsing a product as sponsored by the govt when they are not.

-displaying the name of the consumers current mortgage lender, unless the ad also prominently discloses that the ad is from a creditor not affiliated with the consumers mortgage lender.

-making claims of debt elimination if the product advertised would merely replace one debt obligation with another

-creating a false impression that the mortgage broker or lender is a “counselor” for the consumer

-in foreign language ads, using a low introductory “teaser” rate in a foreign language, while providing required disclosures in English.

192
Q

What are the general record retention requirements under TILA?

What about for mortgage loans?

A

two years after the date disclosures are required to be made or action is required to be taken

3 years, 5 for the CD

193
Q

What are the three coverage tests to determine if a loan is a high cost mortgage loan?

A

-the APR will exceed the average prime offer rate (APOR) as of date the interest rate is set by
–6.5 for first lien
–8.5% for first lien loans less than $50M or sub lien transaction

-The total points and fees exceed
–5% of total loan amount for loans more than $20M
–the lesser of 8% of total loan amount or $1M for loans less than $20M

-There is a prepayment penalty more than 36 months after consummation. Or the penalty exceeds more than 2% of the amount prepaid

194
Q

How do you calculate total loan amount?

A

The “total loan amount” (using the face amount of the note) for closed-end credit is calculated by taking the amount financed and deducting any cost listed in 12 CFR 1026.32(b)(1)(iii), (iv), or (vi) that is both included in points and fees and financed by the creditor. That includes all RE related fees (title examination, credit report, loan doc prep, escrow, notary fees, appraisal), credit insurance (life, property, loss of income, etc), and any prepayment penalty.

The “total loan amount” for open-end credit is the credit plan limit when the account is opened.

195
Q

Are prepayment penalties prohibited for high cost mortgages?

A

12 CFR 1026.32(d)(6) prohibits prepayment penalties for high-cost mortgages. However, if a mortgage loan has a
prepayment penalty that may be imposed more than 36 months after consummation or account opening or that is greater than 2 percent of the amount prepaid, the loan is a high-cost mortgage
regardless of interest rate or fees. Therefore, the prepayment penalty coverage test above effectively bans transactions of the types subject to HOEPA coverage that permit creditors to charge prepayment penalties that exceed the prescribed limits.

196
Q

What transactions are exempt from HOEPA coverage?

A

• Reverse mortgage transactions
• A transaction that finances the initial construction of a
dwelling;
• A transaction originated by a Housing Finance Agency,
where the Housing Finance Agency is the creditor for the transaction; or
• A transaction originated pursuant to the U.S. Department of Agriculture’s Rural Development Section 502 Direct Loan Program.

197
Q

What is the APR based on for HOEPA coverage?

since APR used to determine if a mortgage is high cost is different than that in TILA disclosures.

A

• If the APR will not vary during the length of the loan or credit plan (i.e., for fixed-rate transactions), the interest rate in effect as of the date the interest rate for the transaction is set
• If the interest rate may vary during the term of the loan or credit plan in accordance with an index, the interest rate that results from adding the maximum margin permitted at any time during the term of the loan or credit plan to the index rate in effect as of the date the interest rate for the
transaction is set, or to the introductory interest rate,
whichever is greater; or
• If the interest rate may or will vary during the term of the loan or credit plan other than as described above (i.e., as in a step-rate transaction), the maximum interest rate that may
be imposed during the life of the loan or credit plan

198
Q

what is a prepayment penalty?

A

Closed end: Charge imposed for paying all or part of the transaction’s principal before the date on which the principal is due

Open-end: charge imposed by the creditor if the consumer terminates the credit plan prior to the end of its term.

199
Q

For high cost mortgage loans, what is required to be disclosed before account opening/consummation in addition to the other applicable TILA disclosures? (5)

A

-notice including required language from 1026.31(c)(1)

-APR
-regular or minimum periodic payment and amount of any balloon payment
-for variable rate transaction, statement that the interest and monthly payment may increase, and the amount of the single max monthly payment based on the max interest rate required to be included in the contract
-the total amount borrowed for closed-end credit transactions or the credit limit (open end)
–(closed end) if the amount borrowed includes charges to be financed, this fact must be stated and will be accurate if its not more than $100 above or below the amount required to be disclosed.

200
Q

What loan terms are prohibited under high cost mortgage loans? (3)

A

-negative amortization
-interest rate increases after default
-prepayment penalties

201
Q

What loan terms are restricted under high cost mortgages? (2)

A

-balloon payments
-due on demand clauses

202
Q

what types of balloon payments are permitted and restricted under high cost mortgage loans?

A

-Balloon payments more than 2x regular period payment are generally restricted except:

closed end:
-loan has payment schedule adjusted seasonally
-“bridge” loan maturing in 12 mos or less
-small creditor is rural underserved area

open end:
where the terms of the
plan provide for a draw period where no payment is
required, followed by a repayment period where no
further draws may be taken, the initial payment required after conversion to the repayment phase of the
credit plan is not considered a “balloon” payment.

However, if the terms of an open-end credit plan do
not provide for a separate draw period and repayment
period, the balloon payment limitation applies

203
Q

When are acceleration clauses or demand features permitted for high cost mortgages? (3)

A

-fraud
-consumer failed to repay/default
-action or inaction by consumer that threatens security interest of loan (failure to pay taxes)

204
Q

Can a creditor refinance a consumer’s high cost mortgage into a second high cost mortgage within one year of originating the first loan?

A

Not unless the second high cost mortgage is in the consumers interest.

205
Q

True or false: a creditor does not have to asses a consumers ability to repay for a high cost mortgage loan?

A

False: a creditor cannot make such loans without regard for the consumers repayment ability including the consumer’s current and reasonably expected income, employment, assets other than collateral, and current obligations, including any mortgage related obligations.

For both closed and open end credit.

206
Q

In addition to disclosures and confirming ability to repay, what else are creditors required to ensure consumers have for high cost mortgage loans?

A

They must receive written clarification that the consumer has obtained counseling on the advisability of the mortgage from a HUD approved counselor. Counseling must occur after the consumer receives the good faith estimate or initial TILA disclosure.

207
Q

What are the Late fee requirements for high cost mortgages?

A

Must be permitted by the loan terms and may not exceed 4% of the amount of the payment that is past due.

These charges are only permitted if the payment is not received by the end of the 15-day period beginning on the day the payment is due or, where interest on each installment is paid in advance, by the end of the 30-day period beginning on the day the payment is due

Creditors are also prohibited from pyramiding late fees (fee on fee).

208
Q

When must a creditor /servicer provide a payoff statement for a high cost mortgage loan?

Can they charge a fee for that statement?

A

Within 5 business days after receiving request for the statement

They cannot charge a fee for providing the statement but can charge a processing fee to cover the cost of providing the statement by fax or courier. This fee must be disclosed in advance with the option that other means would not result in a fee.

209
Q

What is a reverse mortgage?

A

non-recourse transaction secured by the consumer’s principal dwelling that ties repayment (other than upon
default) to the homeowner’s death or permanent move from, or transfer of the title of, the home

210
Q

What is a Higher priced mortgage loan? (3)

A

A closed end consumer credit transaction secured by the consumer’s principal dwelling with an APR that exceeds the average prime offer rate for a comparable transaction as of the date the interest rate is set by:

-1.5 or more %pts for 1st lien loans with a principal that does not exceed the max set by Freddie Mac

-2.5 or more %pts for 1st lien loans where the principal exceeds the max set by Freddie Mac

-3.5 or more %pts for sub lien loans

211
Q

What is the Average Prime Offer Rate?

A

an APR that is derived from average interest rates, points, and other loan pricing terms currently offered to consumers by a representative sample of creditors for mortgages that have low-risk pricing characteristics.

Table with APORs published by CFPB at least weekly. Available on FFIEC website.

212
Q

What are the main requirements subject to higher priced mortgage loans?

A

-verify consumer’s ability to repay
-Escrow requirement
-Appraisal requirement

213
Q

What is the escrow requirement for Higher Priced mortgage loans?

exceptions? (6)

A

a creditor may not extend a HPML secured by a first lien on a principal dwelling unless and escrow account is established before consummation for payment of taxes and mortgage insurance.

exceptions:
-transaction secured by shares in a cooperative
-transaction to finance the initial construction of a dwelling
-temp or bridge loans with a term of 12mos or less
-reverse mortgage
-creditors that operate in rural/underserved areas

Limited exception to establish escrow for property taxes only on loans secured by dwelling in a “common interest community” (master insurance policy community)

214
Q

What is the definition of a rural area?

A

A rural area is a county that is neither in a metropolitan statistical area or a
micropolitan statistical area that is adjacent to a metropolitan statistical area; or a census block that is not in an urban area, as defined by the U.S. Census Bureau
using the latest decennial census of the United States; or a county or a census
block that has been designated as “rural” by the CFPB pursuant to the application process established in 2016.

215
Q

What is a underserved area?

A

An underserved area is a county defined by using Home Mortgage Disclosure Act data for the preceding year to determine whether it is a county in which no more
than two creditors extended covered transactions secured by first liens on
properties in the county five or more times.

216
Q

To be considered a creditor that operates in a rural or underserved area, a creditor must? (4)

A

-during the preceding calendar year, must have made a covered transaction secured by a first lien property located in a rural or underserved area.

-must not have extended more than 2M covered transactions in the preceding calendar year

-have less than $2B in total assets as of the preceding Dec 31st

-creditor must not maintain escrow accounts for consumer credit secured by real property or a dwelling

217
Q

Can a creditor cancel an escrow account for a HPML?

A

Yes only upon the earlier of termination of the underlying loan or a cancellation request from the consumer 5 years or later after consummation.

However, cancellation cannot happen unless the unpaid principal balance of the HPML is less than 80% of the original value of the property securing the loan and the consumer is not currently delinquent or in default on the loan.

218
Q

What is the appraisal requirement for an HPML?

exemption? (8)

A

A creditor must not extend a HPML without first obtaining a written appraisal of the property to be mortgaged. The appraisal must be performed by a licensed appraiser and must include a physical visit of the interior of the dwelling.

exceptions:
-qualified mortgages under TILA, HUD, VA or USDA.
-extension of credit equal to or less than the applicable threshold amount (annually adjusted) 2021-$27,200
-secured by mobile home, boat or trailer
-for initial construction of dwelling
-loan with maturity of 12 mos or less (bridge loans)
-reverse mortgage
-refinancing as long as it meets 1026.20(a)
-secured by a manufactured home (conditions apply)

219
Q

What are the requirements for a refinance of an HPML to be exempt from the appraisal requirement? (3)

A

-credit risk is is retained by the person who held the credit risk for the existing obligation
-the regular periodic payments do not cause principal balance to increase, allow the consumer to defer repayment of principal, result in a balloon payment
-proceeds from refinancing are used solely to satisfy the existing obligation and amounts attributed solely to the cost of refinancing.

220
Q

What are the requirements for a manufactured HPML to be exempt from the appraisal requirement? (2)

A

-transaction is for a new manufactured home and land (appraiser does not need to physically visit the home)

-if the transaction is for the home and not the land as long as the creditor obtains invoice for the home, cost estimate of value, valuation is performed by an independent party.

-transactions secured by a used manufactured home and land are not exempt from the appraisal requirement.

221
Q

What is the safe harbor for appraisals on HPMLs?

A

A creditor may obtain a safe harbor for compliance with 12 CFR 1026.35(c)(3)(i) by ordering that the appraisal be completed in conformity with USPAP and the requirements applicable to appraisers in Title IX of FIRREA and its implementing regulations, verifying that the appraiser is certified or licensed through the National Registry; and confirming that the written appraisal contains the elements listed in Appendix N of Regulation Z.

222
Q

In what two instances would the creditor need to obtain additional appraisals before extending HPMLs?

A

-if the secured dwelling was acquired by the seller 90 or fewer days prior to the customer’s agreement to purchase the property and the price of the property has increased more than 10%

-When the dwelling was acquired by the seller between 91 and 180 days prior to agreement to purchase the property and the price has increased more then 20%

Unless the creditor can prove that circumstances do not require an additional appraisal (record of deed or property tax bill)

223
Q

What is required of a creditor if an additional appraisal is required on an HPML? (3)

A

-the additional written appraisal must be conducted by a different appraiser
-creditor can only charge for one of the two appraisals
-must contain an analysis of the price change due to market conditions.

224
Q

The additional appraisal requirements for HPMLs do not apply to the extension of credit that finance the acquisition of a property that is? (7)

A

-from a govt agency
-through foreclosure, deed in lieu, or other judicial procedures
-from a nonprofit as part of a govt program to acquire through foreclosure, etc.
-through inheritance or court order (divorce)
-from an employer or relocation agency
-from a servicemember who received a deployment or change in station after purchase
-located in a federal disaster area if FIRREA has been waived
-located in a rural county

225
Q

What are the disclosure and timing requirements for an appraisal on an HPML?

A

-disclosures no later than the 3rd business day after the creditor receives the application, or no later than 3 business days after the loan request becomes an HPML (ECOA disclosures or the LE model form after 2015 meets both ECOA and TRID requirements)

-copy of appraisal at no cost to the consumer no later than 3 business days prior to consummation of the loan. if it will not be consummated no later than 30 days after the creditor determines that the loan will not be consummated.

226
Q

What is a loan originator?

A

The term “loan originator” means a person who, in expectation of direct or indirect compensation or other monetary gain or for direct or indirect compensation or other monetary gain, performs any of the following activities:

• Takes an application, offers, arranges, assists a consumer in obtaining or applying to obtain, negotiates, or otherwise obtains or makes an extension of consumer credit for another person; or

• Through advertising or other means of communication represents to the public that such person can or will perform any of these activities.

227
Q

What type of loan originator compensation is prohibited? (3)

exemptions? (2)

A

They cannot receive compensation in connection with closed-end consumer credit transactions secured by a dwelling based on the term of a transaction. (term of a transaction: any right or obligation of the parties to a credit transaction)

Amount of credit is not a term of a transaction, provided such compensation is based on a fixed percentage of the amount of credit extended.

-dual compensation-additional compensation in connection with a transaction (from third party)

-prohibition on steering to loans based on the fact an originator will receive better compensation.

Exemptions: HELOCs, timeshare secured credit

228
Q

What type of loan officer compensation is permitted?

A

-compensation from a contribution/benefit plan that is a designated tax advantage plan

-compensation under a non-deferred profits based compensation plan that does not exceed 10% of total compensation and the LO was the originator of 10 or fewer transitions during the last 12 mos

229
Q

Is Negative amortization counselling required?

A

Yes a creditor may not extend a negative amortizing loan to a first time borrower in connection with a closed-end credit transaction secured by a dwelling, unless the creditor receives documentation the consumer has received home ownership counselling through HUD.

230
Q

When is the recipient of a transferred mortgage required to notify the consumer of a new owner?

A

No later than 30 calendar days after the date on which the mortgage loan is acquired or otherwise sold.

231
Q

What must the notice of new ownership contain? (6)

A

In writing in a form they may keep:

-identification of the loan that was sold, assigned, or transferred
-Name address and telephone number of new owner
-date of transfer
-name, address and telephone of agent or party who has right to receive notice of right to rescind and resolve payment issues on behalf of the new owner
-Location where transfer of ownership of the debt to the new owner is or may be recorded in public record, or that it has not been recorded yet.
-any other information the new owner would like to convey

232
Q

In what circumstances is a notice of new owner required?

A

Sale or Transfer for any consumer credit secured by principal dwelling and closed end consumer credit secured by a dwelling or real property.

open end HELOCs covered under first part.

233
Q

How should the notice of new owner be provided if there are multiple new owners?

A

In a joint acquisition, they must provide a single disclosure that lists all new owners. But can only list one owner for applicable disclosures that only pertain to one entity.

234
Q

What are the exceptions to providing the notice of new owner? (3)

A

-new owner sells, assigns, or transfers the mortgage loan on or before the 30th calendar day following the day they acquired the loan.
-transfer is in connection with a repurchase agreement
-new owner acquires only a partial interest in the mortgage and the party authorized to receive recession notices does not change.

235
Q

As part of the notice of new ownership (loan transfer), the creditor must provide what additional disclosures?

and what must they include? (4)

A

Information on the new owner’s partial payment policy. including:

-Heading “partial payment”
-if partial payments are accepted, a statement that the lender may apply them to the loan
-if partial payments are not applied to the loan, that the lender my hold partial payment in a separate account until the consumer pays the remainder of the payment before applying it to the loan
-if the lender does not accept partial payments
-statement that if the loan is sold, a new lender may have a different policy

236
Q

Who is required to provide periodic statements to the borrower for residential mortgage loans?

when are they required to be provided?

A

Creditors, assignees, or servicers my decide among themselves which of them will provide the required disclosures. However, a relationship where one party agrees to provide disclosures on behalf of other parties does not absolve other parties from legal obligations.

They must be provided within a reasonably prompt time after the payment is due or at the end of any courtesy period from the pervious billing cycle. Delivering, emailing, or mailing within 4 days of the closing of the courtesy period is generally acceptable.

237
Q

Periodic statements for residential mortgage loans are not required for? (7)

A

-reverse mortgages
-time share secured loans
-fixed rate loans where the servicer currently provides consumers with coupon books that contain account info, contact info, delinquency info, info obtain more about account
-small servicers
-mortgage loan while consumer is a debtor in bankruptcy
-charged off loans
-successor in interest if they have confirmed and assumed the loan

238
Q

What is a small servicer? (3)

What if they not longer are a small servicer?

A

As of January 1 for the remainder of the calendar year:

-services 5,000 or fewer mortgage loans
-meets the definition of a housing finance agency
-or is a nonprofit entity that services 5,000 or fewer mortgage loans

If a servicer no longer qualifies as a small servicer they have the later of 6 months from the time it ceases to qualify or until January 1 to come into compliance with requirements.

239
Q

What are servicers required to include on periodic statements? (7)

A

-Amount due (amount and explanation of amount)
-Past Payment Breakdown
-Transaction Activity
-Partial payment information (if applicable)
-Contact Info
-Account Information
-Delinquency info (if applicable)

240
Q

Servicers are required to include what on a periodic statement as part of the “amount due?”

A

They must include the due date, amount of any late payment fee, date fees may be assessed and the amount due which must be more prominent than other disclosures.

They must also include an explanation of the amount due, including monthly payment amount with a breakdown of what will apply to principal, interest, escrow, the total sum of fees/charges since the last statement, and any payment amounts past due.

-if there are multiple payment options the amount due must be disclosed for every payment option including the explanation.

241
Q

How must servicers disclose the amount due on a periodic statement when the mortgage loan has been accelerated?

What about the explanation of amount due?

A

If servicer will accept a lesser amount to reinstate an accelerated loan then:

-should indicate the amount due is only accurate for a specified period of time (as of, good through) and that they will reinstate the loan as of that date.

-On front page of statement explanation should list the reinstatement amount and the accelerated amount.
–The monthly payment is not required to be disclosed.
–statement indicating when the reinstatement amount will be accepted as of date (good through) and any special instructions.

242
Q

How must servicers disclose the amount due and explanation on a periodic statement when the loan is part of a temp loss mitigation program.

A

If the consumer has agreed to the program:
-amount due may identify either the payment amount due under the loss mitigation program or the amount due according to the loan

If the amount due identifies the amount under the temp program:
-the explanation must include both the amount due according to the loan contract and the payment amount under the temp program and that the amount due is disclosed different due to the temp program

243
Q

How must servicers disclose the amount due for permanent loan modifications on a periodic statement?

A

If the loan contract has been permanently modified, the amount due must identify only the amount due under the modified loan contract

244
Q

What must be included as part of the past payment breakdown on a periodic statement?

A

The total of all payments received since the last statement and the total of all payments received since the start of the calendar year, including, for each payment, a breakdown of how the payment(s) was applied to principal, interest, escrow, and/or fees and charges, and any amount held in a suspense or unapplied funds account (if applicable)

245
Q

What must be included as part of the transaction activity on a periodic statement?

A

A list of transaction activity (including dates, a brief
description, and amount) for the current billing cycle,
including any credits or debits that affect the current
amount due, with the date, amount, and brief description of each transaction;

246
Q

What must be included as part of the Partial payment information on a periodic statement?

A

If a statement reflects a past partial payment held in a suspense or unapplied funds account, information explaining what the consumer must do to have the payment applied to the mortgage. Information must be on the front page or a separate page of the statement or separate letter

247
Q

What must be included as part of the contact information on a periodic statement?

A

Contact information for the servicer, including a toll-free
telephone number and email address (if applicable) that the consumer may use to obtain information regarding the account. Contact information must be on the front page of the statement;

248
Q

What must be included as part of the account information on a periodic statement?

A

Account information, including the outstanding principal balance, the current interest rate, the date after which the interest rate may change if the loan is an ARM, and any prepayment penalty, as well as the web address for CFPB’s or HUD’s list of homeownership counselors or counseling organizations and the HUD toll-free telephone number to
contact the counselors or counseling organizations.

249
Q

How is the length of a consumers delinquency measured?

When would a consumer be considered delinquent?

A

As of the date of the periodic statement or the date of the written notice provided under 1026.41 (e)(3)(iv))

A consumer’s delinquency begins on the date an amount sufficient to cover a periodic payment of principal, interest, and escrow, if applicable, becomes due and unpaid, even if the consumer is
afforded a period after the due date to pay before the servicer assesses a late fee.

A consumer is delinquent if one or more periodic payments of principal, interest, and escrow, if
applicable, are due and unpaid

250
Q

When are servicers required to provide additional disclosures on the periodic statements regarding delinquency info?

what must they provide additionally? (7)

A

Servicers must provide consumers that are more than 45 days delinquent on past payments additional information including:

-Length of delinquency
-note on possible risks of being delinquent (foreclosure)
-An account history for either the previous six months or the period since the last time the account was current (whichever is shorter), which details the amount past due from each billing cycle and the date on which payments were credited to the account as fully paid;
-if applicable any loss mitigation that consumer has agreed to
-notice whether the servicer has initiated foreclosure process
-total payments required to bring account current
-a reference to homeownership counseling info.

The info should be grouped together and set off from other groupings of items (this can be accomplished through boxes)

251
Q

Can creditors add to the required disclosures for delinquency on the periodic statements?

A

yes as long as the additional info does not overwhelm or obscure the required disclosures. ex: escrow information may be included.

252
Q

Are servicers required to provide periodic statements to consumers in mortgage loan bankruptcy?

exemptions?

A

Yes, servicers are required to send modified periodic statements or coupon books while any consumer on a mortgage loan is a debtor in bankruptcy or if they have discharged personal liability for the mortgage loan under chapter 7, 11, 12, or 13 bankruptcy.

exemptions:
-if the debtor falls into the categories above and requests in writing that the servicer cease providing periodic statements
-if they surrendered the dwelling, provides avoidance of the lien or does not pay for the pre-bankruptcy arrearage

253
Q

What do the ability to repay requirements apply to?

exemptions?

A

ATRQM applies to most closed end mortgage loans

exclusions:
-HELOCs (unless for High cost mortgage, then required)
-timeshare mortgages
-reverse mortgages
-temp bridge loan (12 mos or less)
-Construction phase of loan
-loan made under the economic stabilization act of 2008.

254
Q

What 8 underwriting factors must creditors consider when determining a consumer’s ability to repay?

A

-current or reasonably expected income/assets
-current employment status if income is used for ATR
-monthly payments on any simultaneous loan loans secured by the same dwelling (HELOC consummated at the same time)
-monthly payment for mortgage obligations including property taxes
-current debt obligation, alimony and child support
-monthly DTI or residual income
-consumer’s credit history

255
Q

How should a creditor calculated the monthly mortgage payment on a covered transaction under ATR?

A

using the greater of the fully indexed rate or any introductory interest rate, and the monthly fully amortizing payments that are substantially equal during the loan term.

256
Q

What is considered a non-standard mortgage under ATR? (3)

Is it considered a covered transaction?

A

-an adjustable rate mortgage with an introductory fixed interest period of one year or longer
-interest only loan
-negative amortization loan

They are considered covered transactions.

257
Q

What is considered a standard mortgage under ATR? (5)

Is this a covered transaction?

A

-Periodic payments that do not cause the principal balance to increase, do not defer repayment of principal, or result in balloon payments
-Total points and fees not more than allowed
-term no greater than 40 years
-interest rate fixed for the first 5 years of loan
-proceeds used solely to pay off outstanding principal on non-standard mortgage and closing or settlement costs

These are considered covered transactions

258
Q

Holders of non-standard mortgages can refinance into standard mortgages without considering ATR requirements if what conditions are met? (3)

A

All must be met:

-The standard mortgage has a monthly payment materially lower than the non-standard
-creditor receives a written application no later than 2 months after the non-standard is recast
-customers made no more than 1 payment 30 days late on the non-standard mortgage during the last year. An no late payments more than 30 days in the last 6 months of the holder receiving the application for a standard mortgage.

259
Q

True or false:

Qualified mortgages that are higher priced covered transactions receive a safe harbor under the ability to repay provisions, which means the presumption of compliance cannot be rebutted.

A

False: this is only true for qualified mortgages that are NOT higher priced covered transactions.

Higher priced qualified mortgages receive a rebuttable presumption of compliance. The loan is presumed to comply with ATR, but the consumer would have the opportunity to rebut in future ability to repay litigation.

260
Q

What can a qualified mortgage not have? (5)

A

-negative amortization
-interest only payments
-balloon payments
-terms exceeding 30 years

For loans greater than or equal to $100M
-cannot have points and fees paid by the consumer that exceed 3% of the total loan amount

261
Q

What is the underwriting criteria for Qualified mortgages? (2)

What must they consider when calculating the DTI?

A

-monthly payment calculated based on the higher payment that will apply in the first 5 years of the loan after the date on which the 1st periodic payment is due

-total (back-end) DTI is less than or equal to 43%

DTI must consider and verify the consumer’s current debt obligations, alimony, and child support.

262
Q

Can portfolio loans be considered qualified mortgages?

A

Yes for certain small creditors, as long as they meet all the requirements (prohibitions). However, the creditor must verify the consumers income and debt obligations. But may do so without regard for Appendix Q or the 43% DTI threshold.

And for creditors with less than $10B in assets (covered institution) under EGRRCPA

263
Q

What is a private education loan? (3)

A

extension of credit:
-not made, insured, or guaranteed under Title 5 of the Higher education act
-expressly in whole or in part for postsecondary educational expenses regardless if the loan is provided to the educational institution
-does not include open end credit or any loan secured by real property or dwelling.

264
Q

Private education loan does not include an extension of credit in which the covered educational institution is the creditor if? (2)

A
  • the term is 90 days or less
  • an interest rate will not be applied to the credit balance, and the term of the extension of credit is one year or less
265
Q

What are the three stages of disclosures that must be provided for private education loans?

A

-application or solicitation disclosures
-approval disclosures
-final disclosures which must be provided at least 3 business days prior to the disbursement of loan funds.

266
Q

What rights of the consumer must be disclosed for private education loans? (3)

A

-if approved, consumer has right to accept the loan on the terms approved for up to 30 calendar days

-rate and terms of the loan will not change during that period, except for changes to the rate based on adjustments to the index used

-consumer has right to cancel the loan, without penalty, until midnight of the 3rd business day following the date the consumer receives the final disclosures.

267
Q

What is co-branding and how is it prohibited in private education loans?

A

Regulation Z prohibits creditors from using the name, emblem, mascot, or logo of a covered institution (or other words, pictures, or symbols readily identified with a covered institution) in the marketing of private education loans in a way
that implies endorsement by the educational institution.

Unless there is an equally prominent and close proximity disclosure that the educational institution does not endorse the creditors loans and is unaffiliated.

268
Q

What are the private education loan protections for students and cosigners in the event of death or bankruptcy? (3)

A

Loans agreed after 11/24/2018:
-creditor may not declare default or accelerate debt against a student based on bankruptcy or death of cosigner
-must release cosigners of their obligations related to the loan in death or bankruptcy of student (must notify and conduct in reasonable time)
-must give student the option to designate legal authority to someone in the event of their death.

269
Q

When are creditors required to assess a consumer’s ability to repay for a credit card? (2)

A

before opening a new account

increasing the credit limit on an existing account

270
Q

When assessing ATR for a credit card, TILA requires that issuers consider at least one of the following? (3)

A

-DTI
-Debt to assets
-income after paying debt obligations (residual income)

271
Q

Are credit card issuer’s required to assess a consumers ability to make the required payments, even though the minimum payment is unknown at account opening?

A

Yes, they are also required to maintain policies and procedures to consider a consumer’s income, assets, and current obligations. Issuer’s must use a reasonable method to estimate a consumer’s minimum payment. There are also safe harbors for this situation.

272
Q

What are the safe harbors for card issuers to estimate the required minimum periodic payment? (2)

A

-assume utilization, from 1st day of billing cycle, of the full credit line
-uses a minimum payment formula that includes interest charges and any mandatory fees

Both must match the account, interest, fees and product type associated with the account.

273
Q

TILA prohibits the issuance of a credit card to any consumer ____ or younger, unless what? (2)

A

-21 or younger

unless creditor has:
- information indicating that the underage consumer has independent ability to make the required payment
-the account has a cosigner, guarantor, or joint applicant who is over 21 and has the ability to repay

274
Q

What is required to increase a credit line on a credit card account for an individual under 21? (2)

A

-if account was opened based on the underage consumer’s independent ability to repay, increases must also assess the consumer’s independent ability to repay at the new credit limit or get a co-signer, etc.

-if the account was opened with a cosigner, the creditor must get written agreement from the cosigner before increasing the credit limit.

275
Q

What are the fee limitations on credit card accounts during the first year after account opening?

(account opening is the first day the account is available to use)

A

During the first year after account opening, issuers are prohibited from requiring consumers to pay fees that in aggregate exceed 25% of the initial credit limit at opening.

Fees for late payments, returned payments, pre consummation fees, and exceeding the credit limit are excluded.

276
Q

What are the penalty fee limitations on credit card accounts? (5)

Adjusted annually 2021

A

-$29 for paying late or violating account terms for first time

-$40 for additional violation of the same type during same billing cycle or 1 of next 6 cycles

-3% of the delinquent balance on the charge card account that requires payment of outstanding balances in full at the end of each billing cycle if payment has not been received for 2 or more billing cycles.

-Penalty fees cannot exceed the dollar amount associated with the consumers violation (ex: charging $40 fee for not making a $20 min payment)

-Penalty fees cannot be assessed when there is no dollar amount associated with a violation, like inactivity fees, or declined transaction fees.

277
Q

How are payments required to be allocated for credit card accounts with different rates that apply to different balances?

A

allocate payments in excess of the minimum payment first to the balance with the highest APR and then to any remaining portion to the other balances in descending order based on the applicable APR.

-for deferred interest programs, payment must go to amount with deferred interest first.

278
Q

Are credit card issuers permitted to increase the APR during the first year of account opening?

What about after the first year?

A

No, but after the first year they can as long as they comply with the 45-day advance notice requirement.

279
Q

What is the consumer consent requirement for credit card accounts?

A

TILA requires an issuer obtain a consumer’s consent (opt in) before they can impose any fees on a consumer account for making an extension of credit that exceeds the account’s credit limit.

Issuer’s must disclose any fees or increased rates to the consumer when providing them the option to opt in.

280
Q

True or false: An issuer can only charge 1 over the limit fee per billing cycle on a credit card

A

True, also the issuer cannot impose an over the limit fee for the same transaction in more than 3 billing cycles.

281
Q

What 3 UDAP are there in connection with credit cards?

A

• Assessing an over-the-limit fee because the creditor failed to promptly replenish the consumer’s available credit;

• Conditioning the amount of available credit on the consumer’s consent to the payment of over-the-limit
transactions (e.g., opting in to an over-the-limit service to obtain a higher credit limit); and

• Imposing any over-the-limit fee if the credit limit is exceeded solely because of the issuer’s assessment of
accrued interest charges or fees on the consumer’s account.

282
Q

What are the special rules regarding marketing credit cards to students (2)?

A
  • the marketing of a covered separate credit feature accessible by a hybrid prepaid-credit card and prepaid account and a prepaid account where a covered separate credit feature accessible by a hybrid prepaid-credit card may be added in the future, to students at an institution of higher education

-Limitations on the creditors ability to offer a college student tangible items to open an credit card account on or near the campus (1000ft) or at a campus sponsored event.

283
Q

Are credit card issuer’s required to disclose their card agreements online?

A

Yes issuers must post credit card agreements on their websites and submit them to the CFPB unless there are fewer than 10,000 open accounts

284
Q

Are credit card issuers required to reevaluate rate increases?

A

Yes, accounts subject to a rate increase must be reviewed no less frequently than once each 6 mos and if appropriate reduce the APR within 45 days after the evaluation. This could be from a rate increase due to creditworthiness, market conditions, based on factors not specific to the consumer.

285
Q

What is a hybrid prepaid-credit card?

A

A prepaid card that can be used to access the separate credit feature where the following two conditions are both satisfied:

-the card can be used to draw, transfer, or authorize either from a separate credit feature in the course of completing transactions to obtain goods, services, cash or P2P transfers

-The separate credit feature is offered by the prepaid account issuer, affiliate or business partner.

286
Q

True or false: The regulation prohibits structuring a hybrid prepaid-credit card to access credit through a negative balance on the asset feature of a prepaid account

A

true generally although there are some exceptions.

287
Q

What is the right of rescission period for credit secured by a consumer’s principal dwelling?

A

3 business days after becoming obligated on the debt

288
Q

What is required to be disclosed regarding rescission? (5)

A

Notice explaining:
-the creditor has a security interest in the home

-that the consumer may rescind,

-how they may do so,

-the effects of doing so, and

-the date the rescission period expires.

289
Q

To rescind a transaction, a consumer must notify the creditor in writing by midnight of the third business day after the latest of what three events?

A

-consummation of the transaction

-delivery of material TILA disclosures

-receipt of the required notice of the right to rescind

290
Q

Can a creditor disburse the monies prior to the end of the 3 day rescission period?

A

No, they cannot until they are reasonably satisfied that the consumer has not rescinded.

291
Q

What is a creditor required to do if a consumer rescinds a transaction?

A

creditor must refund all amounts paid by the consumer and terminate its security interest in the home (this includes any funds to third parties)

292
Q

True or false:

if the right to rescission notice or material TILA disclosures are not delivered or are inaccurate, the consumer’s right to rescind cannot be extended?

A

False: in this situation the right to rescind may be extended from three days up to three years.