Free MLO Questions Attempt

The Real Estate Settlement Procedures Act (RESPA) requires disclosures intended to prevent lenders and mortgage loan originators (MLOs) from increasing fees during the loan origination process. RESPA mandates the disclosure of estimated fees through the Loan Estimate (LE) and ensures that fees do not change substantially from the Loan Estimate to the final Closing Disclosure (CD) unless specific conditions justify the changes. This protects borrowers from "fee increases" during the settlement process.

While TILA (A) deals with disclosure of loan terms and APR, RESPA (D) focuses specifically on fees and closing costs during origination.

References:

RESPA (Real Estate Settlement Procedures Act), 12 USC §2601

CFPB RESPA Guidelines on fee tolerances

Under the TILA-RESPA Integrated Disclosure (TRID) rule, the borrower must receive the Loan Estimate (LE) at least 7 business days before the closing (also called consummation) of the mortgage loan. This rule ensures that the borrower has sufficient time to review and understand the loan terms and costs.

The 7-day waiting period starts from the day the Loan Estimate is delivered or placed in the mail. This period allows the borrower to ask questions and possibly negotiate terms before finalizing the mortgage.

References:

TILA-RESPA Integrated Disclosure Rule (TRID), 12 CFR §1026.19(e)

Consumer Financial Protection Bureau (CFPB) Guidelines

Under the USA Patriot Act, if a Suspicious Activity Report (SAR) is filed due to potential illegal activities, the MLO (Mortgage Loan Originator) is prohibited from discussing the filing of the SAR with any parties involved in the transaction, including the buyer’s agent, loan processor, or any other party. This prohibition ensures that the investigation is not compromised and that the confidentiality of the report is maintained.

Discussing the SAR with any party is considered a violation of anti-money laundering (AML) rules.

References:

USA Patriot Act, Anti-Money Laundering Provisions

FinCEN Guidelines on SAR Confidentiality

An origination charge is an allowable closing cost typically found on the Closing Disclosure (CD). This fee is charged by the lender for processing the mortgage application and creating the loan. It may include administrative fees, underwriting fees, and other costs related to loan origination.

Referral fees (B) are illegal under RESPA.

Servicing fees (C) are not typically listed as closing costs but are part of ongoing loan maintenance.

Yield-to-loan fees (D) are not a standard item on a Closing Disclosure.

References:

TILA-RESPA Integrated Disclosure (TRID) Rule

RESPA (Real Estate Settlement Procedures Act) Section 8