RESPA's purpose, the loans it covers, and the definition of mortgage broker

Question 1

Which goal is expressly part of RESPA's purpose?

Accepted Answer

Improving advance disclosure of settlement costs

Answer

Standardizing mortgage interest rates among lenders

Answer

Setting a uniform minimum down payment for home purchases

Answer

Establishing a single underwriting score for mortgage applicants

Question 2

A federally insured bank makes a consumer-purpose first mortgage on a one-family home. The loan has no federal mortgage insurance or guarantee, and no exemption applies. How does RESPA treat it?

Accepted Answer

It is covered because the bank's insured deposits supply a qualifying connection.

Answer

It is exempt because the mortgage itself lacks federal insurance.

Answer

It is covered only after the bank sells it to a federal housing-market institution.

Answer

It is exempt unless the bank is also acting as a mortgage broker.

Question 3

Under Regulation X, which description best defines a mortgage broker?

Accepted Answer

A person other than a lender's employee who provides origination services as an intermediary between borrower and lender

Answer

A lender employee who takes applications for that lender

Answer

A purchaser of existing loans who provides no origination services

Answer

A settlement agent who records closing documents without arranging financing

Question 4

A bank makes a loan secured by the borrower's home, primarily to purchase equipment for the borrower's business. Which fact controls the stated RESPA exemption?

Accepted Answer

The credit is primarily for a business purpose.

Answer

The property is residential, so the business use cannot create an exemption.

Answer

The lender is a bank, so the business use cannot create an exemption.

Answer

The equipment will not itself secure the loan.

Question 5

Which lien position can satisfy the collateral element of a federally related mortgage loan?

Accepted Answer

Either a first lien or a subordinate lien

Answer

A first lien, but not a subordinate lien

Answer

A subordinate lien, but not a first lien

Answer

A first lien, or a subordinate lien only if it finances the home's purchase

Question 6

A broker closes a federally related mortgage in its own name in a table-funded transaction. The obligation is initially assigned to the funding company at settlement. Who is the lender for Regulation X purposes?

Accepted Answer

The funding company receiving the initial assignment

Answer

The broker because its name appears on the closing documents

Answer

The settlement agent disbursing the proceeds

Answer

The investor that might buy the loan in a later resale

Question 7

A lender finances construction of a consumer's home under a loan that may convert to permanent financing with that same lender. The other RESPA coverage elements are met. Which conclusion is correct?

Accepted Answer

The temporary-financing exemption does not apply to this arrangement.

Answer

The loan is exempt because the home is unfinished at closing.

Answer

The loan is exempt until the borrower actually elects conversion.

Answer

The loan is exempt if the construction phase lasts less than two years.

Question 8

Which pair correctly identifies two of Congress's RESPA goals?

Accepted Answer

Reducing required escrow deposits and modernizing land-title recordkeeping

Answer

Reducing required escrow deposits and capping lender origination fees

Answer

Modernizing land-title recordkeeping and requiring title insurance on every covered loan

Answer

Eliminating settlement kickbacks and guaranteeing borrowers the lowest available settlement costs

Question 9

A consumer obtains a loan secured by vacant land. The proceeds will fund a home on that land within 18 months after settlement. All other coverage conditions are met. How does the vacant-land exemption apply?

Accepted Answer

It does not apply because proceeds will fund the home within two years.

Answer

It applies because the property is vacant on the settlement date.

Answer

It applies because construction will take more than one year.

Answer

It does not apply because vacant-land loans have no RESPA exemption.

Question 10

A homeowner refinances a consumer mortgage with a new federally insured bank. The new loan is secured by the same one-family home, and no exemption applies. Which statement is correct?

Accepted Answer

The refinance can be a covered federally related mortgage loan.

Answer

RESPA does not apply because no property purchase occurs.

Answer

RESPA applies only if the original lender also makes the new loan.

Answer

The new loan is an exempt conversion because it replaces old financing.

Question 11

Which transaction is expressly excluded from the category of bona fide secondary-market transactions under Regulation X?

Accepted Answer

A table-funded mortgage broker transaction

Answer

A lender's sale of a loan it closed and funded itself, made the day after settlement

Answer

A pool of seasoned loans sold to Freddie Mac for securitization

Answer

An investor's purchase of a loan that the originating lender keeps servicing

Question 12

A loan assumption requires lender permission, and the lender grants it without charging an assumption fee. How does Regulation X treat the assumption?

Accepted Answer

It is covered because permission is required and obtained.

Answer

It is exempt because the lender charges no assumption fee.

Answer

It is exempt because the buyer assumes rather than refinances the debt.

Answer

It is covered only if the lender increases the interest rate.

Question 13

A lender's salaried employee takes mortgage applications and communicates loan terms to applicants on the lender's behalf. Why is that employee not a mortgage broker under Regulation X's definition?

Accepted Answer

The definition excludes an employee of a lender.

Answer

Taking an application is not an origination service.

Answer

A broker must personally underwrite each loan.

Answer

A broker must close each loan in the broker's own name.

Question 14

A residential mortgage converts to different terms permitted by the original instrument. No new note is required, but the lender charges a conversion fee. Which result follows under Regulation X?

Accepted Answer

The conversion is exempt despite the fee.

Answer

The fee makes the conversion a covered refinance.

Answer

The conversion is exempt only if the loan's terms remain unchanged.

Answer

A new note must be issued whenever a conversion fee is charged.

Question 15

Which practice most directly illustrates the settlement-cost abuse Congress sought to eliminate through RESPA?

Accepted Answer

Referral kickbacks that unnecessarily increase settlement-service costs

Answer

A lender's disclosed fee for origination services it actually performs

Answer

A disclosed affiliated business arrangement that leaves the borrower free to use another provider

Answer

A payment between real estate brokers under a cooperative brokerage arrangement

Question 16

Two otherwise qualifying consumer loans are made by the same bank. Loan One is secured by an individual condominium unit; Loan Two is secured by an entire 12-unit apartment building. Which meets the one-to-four-family collateral element described in RESPA?

Accepted Answer

Loan One, because an individual condominium unit can qualify

Answer

Both, because each property contains residences

Answer

Neither, because both involve multiple-unit buildings

Answer

Loan Two, because it includes the whole building

Question 17

A creditor has none of the other qualifying federal connections. Under the annual-volume route in the federally related mortgage definition, what residential real estate loan activity must that qualifying creditor have?

Accepted Answer

Making or investing more than $1,000,000 per year

Answer

Making or investing at least $100,000 per year

Answer

Making or investing exactly $1,000,000 per year

Answer

Making or investing more than $1,000,000 over its entire history

Question 18

A consumer obtains a genuine bridge loan secured by an otherwise qualifying one-family home. Which RESPA coverage statement applies to that bridge loan?

Accepted Answer

It is exempt under the temporary-financing provision.

Answer

It is covered because a home secures it.

Answer

It is covered if the lender's deposits are federally insured.

Answer

It is exempt only if the borrower pledges vacant land instead.

Question 19

A compliance reviewer calls a broker's table-funded closing an exempt secondary-market sale because the broker assigns the loan immediately. What is the best correction?

Accepted Answer

The initial assignment does not turn a table-funded broker transaction into a secondary-market transaction.

Answer

The exemption applies once the broker charges an origination fee.

Answer

The exemption applies if the broker signs the note as the named lender.

Answer

The exemption applies if the assignment is delayed until the day after closing.

Question 20

A mortgage is assumed under an instrument giving the lender no express right to approve the new borrower. What is the applicable RESPA treatment of the assumption?

Accepted Answer

The assumption is exempt under the assumption-without-approval provision.

Answer

The assumption is covered because the original loan was covered.

Answer

The assumption is covered because the property remains residential.

Answer

The assumption is exempt only if the original borrower remains in possession.

Question 21

Which activity is included in Regulation X's definition of an origination service?

Accepted Answer

Processing a mortgage loan application

Answer

Buying a seasoned mortgage solely as an investment

Answer

Collecting scheduled payments on an already originated loan

Answer

Marketing an existing loan portfolio to secondary-market investors

Question 22

A consumer mortgage satisfies the general RESPA coverage definition and is subject to the integrated disclosure requirements. A trainee concludes that it is entirely outside Regulation X. What is the best assessment?

Accepted Answer

Incorrect; the integrated-disclosure category has specified partial exemptions, not blanket exclusion.

Answer

Correct; integrated disclosures eliminate all Regulation X obligations.

Answer

Incorrect; covered loans cannot receive exemptions from individual Regulation X provisions.

Answer

Correct; only loans using older settlement forms are federally related mortgage loans.

Question 23

A consumer loan secured by a qualifying home is intended by its originating lender for sale to Fannie Mae. No exemption applies. Which coverage conclusion is supported?

Accepted Answer

The intended sale supplies a qualifying connection under the definition.

Answer

The intended sale removes the origination from RESPA.

Answer

The loan must first be purchased before a qualifying connection exists.

Answer

The intended sale matters only if the mortgage also has federal insurance.

Question 24

A creditor makes a loan primarily to fund agricultural operations, secured by the borrower's one-family residence. Which analysis is correct under Regulation X?

Accepted Answer

The loan is exempt because the credit is primarily for an agricultural purpose.

Answer

The residential lien defeats the agricultural-purpose exemption.

Answer

The exemption depends on whether the creditor sells the loan after closing.

Answer

The exemption requires that farmland, rather than the residence, secure the loan.

Question 25

A consumer loan finances a manufactured home located on residential real property securing the loan. The lender has federally insured deposits, and no exemption applies. Which statement is correct?

Accepted Answer

The manufactured-home transaction can be covered on these facts.

Answer

Manufactured housing is excluded from the federally related mortgage definition.

Answer

Coverage requires a site-built structure rather than a manufactured home.

Answer

Federal mortgage insurance is necessary because the home is manufactured.

Question 26

Which statement best describes the scope of the bona fide secondary-market transfer exemption?

Accepted Answer

Such transfers are generally exempt, subject to the specified servicing exception.

Answer

Such transfers are exempt from the servicing provisions as well as settlement provisions.

Answer

Such transfers are treated as new consumer originations requiring the same coverage analysis as a new loan.

Answer

Such transfers are exempt only when the loan is no longer secured by residential property.

Question 27

A lender proposes replacing early settlement-cost information with an explanation delivered after closing. Which RESPA purpose is most directly undermined?

Accepted Answer

Effective advance disclosure of settlement costs

Answer

Modernization of land-title records

Answer

Reduction in required tax and insurance escrow deposits

Answer

Elimination of referral kickbacks that increase settlement costs

Question 28

An independent firm takes applications, processes files, and connects borrowers with lenders in federally related mortgage transactions. It closes loans in the lenders' names. Which fact supports classifying it as a mortgage broker?

Accepted Answer

It provides origination services as an intermediary without being the lender's employee.

Answer

It must first purchase the loans before arranging them.

Answer

It can qualify only after it begins closing loans in its own name.

Answer

It is a mortgage broker because any processor is a mortgage broker regardless of role.

Question 29

A borrower converts a mortgage under its existing permitted terms without a new note. Another borrower signs a new note to replace an existing mortgage. Why should a reviewer avoid applying the loan-conversion exemption to both based on these facts?

Accepted Answer

The second transaction lacks the no-new-note condition required for that exemption.

Answer

Any change in terms disqualifies the first transaction from the exemption.

Answer

The first transaction qualifies only if the lender also changes.

Answer

Replacement of existing debt is itself a conversion exemption.

Question 30

A consumer borrows against vacant land to hold it for personal future use. No loan proceeds will fund a structure or manufactured home on the property. Which coverage rule applies?

Accepted Answer

The vacant-land exemption applies.

Answer

The loan is covered because any real-property lien is sufficient.

Answer

The loan is covered because personal use defeats property-based exemptions.

Answer

The loan is exempt only if it is also a bridge loan.

Question 31

Which reasoning correctly explains why federal mortgage insurance is not required for every RESPA-covered loan?

Accepted Answer

The definition supplies alternative connections, including federal regulation of the lender.

Answer

A residential address by itself establishes the entire federal connection.

Answer

A mortgage broker can waive the need for a qualifying lender connection.

Answer

A consumer's promise to occupy the home substitutes for the lender connection.

Question 32

A proposal would reduce the amount home buyers must place in accounts used to pay property taxes and insurance. Which RESPA purpose does that most closely match?

Accepted Answer

Reducing required escrow deposits

Answer

Improving advance disclosure of settlement costs

Answer

Eliminating kickbacks that increase settlement costs

Answer

Modernizing the recording of land titles

Question 33

A trainee screens out a consumer mortgage solely because its qualifying residential collateral is an individual cooperative unit rather than a detached house. What is the correct response?

Accepted Answer

Individual cooperative units are included in the residential collateral definition.

Answer

Cooperative units qualify only when the mortgage has a subordinate lien.

Answer

The exclusion is correct because RESPA requires detached housing.

Answer

The exclusion is correct unless the borrower purchases the entire cooperative building.

Question 34

Which pair of loans is exempt under the coverage rules stated in Regulation X?

Accepted Answer

A genuine bridge loan and a loan primarily for business purposes

Answer

A same-lender construction-to-permanent loan and a consumer home-purchase mortgage

Answer

An approved assumption requiring lender consent and a genuine bridge loan

Answer

A personal-purpose home refinance and a loan primarily for agricultural purposes

Question 35

A consumer obtains a fixed-rate second mortgage from a federally insured bank for personal home improvements. It is secured by a one-family home, and no exemption applies. A reviewer excludes it because another lender holds the first lien. Which conclusion is correct?

Accepted Answer

The subordinate lien can qualify regardless of who holds the first lien.

Answer

The exclusion is correct because the first lien belongs to another lender.

Answer

The loan qualifies only if it pays off the first mortgage.

Answer

The loan qualifies only if the borrower purchases a different property.

Question 36

Two independent firms provide origination services between borrowers and lenders. One closes in the funding lender's name; the other closes in its own name through table funding. Which assessment of mortgage-broker status is correct?

Accepted Answer

Both can be brokers because own-name table funding is included, not required, in the definition.

Answer

The first is a broker; the second cannot be a broker because it uses its own name.

Answer

The second is a broker; the first cannot be a broker because it does not use its own name.

Answer

Neither is a broker unless it retains the loans after settlement.

Question 37

A training guide says RESPA ensures that each borrower receives the lowest available mortgage interest rate. Which revision best states RESPA's purpose?

Accepted Answer

RESPA promotes timely settlement-cost information and protects against abusive practices that unnecessarily increase settlement charges.

Answer

RESPA standardizes interest rates for borrowers with similar credit scores.

Answer

RESPA substitutes federal underwriting decisions for lender credit review.

Answer

RESPA requires the same settlement price from competing service providers.

Question 38

Two vacant-land loans otherwise meet the coverage conditions. Loan One will use its proceeds to place a manufactured home on the secured property within one year. Loan Two will leave the land unimproved and will fund no structure. Which conclusion follows?

Accepted Answer

Loan One does not receive the vacant-land exemption; Loan Two does.

Answer

Both receive the exemption because the land is vacant at settlement.

Answer

Neither receives the exemption because both are secured by real property.

Answer

Loan One receives the exemption; Loan Two does not.

Question 39

A loan file establishes a first lien on a one-family residence and a federally regulated lender. The reviewer declares RESPA coverage without examining whether the credit is primarily commercial. What analytical step is missing?

Accepted Answer

Checking applicable exemptions after identifying collateral and lender connection

Answer

Determining whether the borrower could have obtained a lower rate

Answer

Determining whether the first lien could instead have been subordinate

Answer

Requiring federal mortgage insurance in addition to lender regulation

Question 40

Two assumptions involve otherwise covered loans. For the first, lender approval is required and granted without a fee. For the second, the lender has no express approval right. Which distinction controls their RESPA treatment?

Accepted Answer

The first is covered and the second is exempt because the approval conditions differ.

Answer

Both are exempt because neither creates a new purchase-money loan.

Answer

Both are covered because their original loans were covered.

Answer

The first is exempt because there is no fee, and the second is covered because approval is unnecessary.