NMLS Updated MLO Exam Questions and Answers by reece

Under RESPA (Real Estate Settlement Procedures Act), Section 8 prohibits any payment, kickback, or unearned fee in exchange for loan referrals. This includes payments to real estate agents or other third parties for referring business to lenders or mortgage brokers. Such payments are illegal because they could inflate the cost of settlement services and are not tied to any actual services rendered.

Payments for actual services (A, D), such as payments to attorneys or contractors for legitimate work, are allowed under RESPA, but paying for loan referrals (B) is strictly prohibited.

References:

RESPA (Real Estate Settlement Procedures Act), Section 8

CFPB RESPA Guidance

Under the Equal Credit Opportunity Act (ECOA), the term "elderly" is defined as anyone who is 62 years of age or older. This designation is significant in fair lending, as the ECOA prohibits discrimination based on age in any aspect of a credit transaction, including mortgage lending.

ECOA protects borrowers from being denied credit or offered unfavorable terms based solely on their age, and it provides additional protections to borrowers considered "elderly."

References:

Equal Credit Opportunity Act (ECOA), 15 U.S.C. § 1691(a)

CFPB Regulation B, 12 CFR Part 1002

Under Regulation Z (TILA), when mortgage loan originators (MLOs) advertise mortgage services, including payment amounts, they must disclose the Annual Percentage Rate (APR). The APR reflects the total cost of the loan, including interest and certain fees, and provides a clear picture of the loan's true cost over time.

Failure to include the APR in an advertisement that mentions payment amounts, interest rates, or other specific loan terms is considered a violation of TILA’s advertising requirements.

Other details (B, C, D), such as the MLO's website or the number of days the rate is available, are not mandatory in all advertisements, but the APR is required.

References:

Truth in Lending Act (TILA), 12 CFR Part 1026 (Regulation Z)

CFPB Advertising Rules for Mortgage Services

In an 80/20 loan structure, the borrower obtains two loans: an 80% first mortgage and a 20% second mortgage, often referred to as a "piggyback loan." The 20% loan has second lien priority, meaning it is subordinate to the 80% loan. If the borrower defaults and the property is foreclosed, the lender holding the first mortgage (80%) is paid first, and the second mortgage (20%) is paid from any remaining proceeds.

The first lien is always the larger 80% loan, and the second lien covers the smaller 20% loan.

References:

Fannie Mae Guidelines on piggyback loans

Freddie Mac Loan Priority Rules