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Question 1 of 6

1. Question
A lender advertises a variable-rate mortgage using the phrase “Fixed Rate Loan” in large bold print. The advertisement does not clearly disclose how long the rate remains fixed or that the rate may later increase.

Why could this advertisement violate Truth-in-Lending advertising rules?
- A) Variable-rate mortgages may never be advertised to consumers
- B) The word “fixed” may not be used unless the advertisement clearly states the period for which the rate is fixed and that the rate may later vary
- C) Adjustable-rate mortgage advertisements must always contain amortization schedules
- D) Mortgage advertisements may reference only APRs and not payment structures
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Question 2 of 6

2. Question
A lender advertises a fixed-rate mortgage product with an introductory payment amount that later increases even though the loan itself is not an adjustable-rate mortgage.

Under the final advertising rule, why could this advertisement be misleading?
- A) The term “fixed” may not be used if payments later increase unless the advertisement clearly discloses the limited fixed-payment period and future payment increase
- B) Fixed-rate mortgage advertisements may never contain payment examples
- C) All non-variable-rate mortgage advertisements are exempt from Truth-in-Lending advertising requirements
- D) The term “fixed” may only refer to the interest rate and never to payment amounts
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Question 3 of 6

3. Question
A mortgage advertisement promotes both fixed-rate loans and adjustable-rate mortgage products within the same advertisement.

What disclosure is required when advertisements promote both fixed-rate and variable-rate transactions?
- A) The lender must provide a complete underwriting approval checklist
- B) The phrase “Adjustable-Rate Mortgage,” “Variable-Rate Mortgage,” or “ARM” must appear with equal prominence as any use of the word “fixed”
- C) The lender must disclose all future payment adjustments over the full loan term
- D) The lender must provide the borrower’s projected equity position after five years
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Question 4 of 6

4. Question
A lender advertises a variable-rate mortgage product and uses the term “fixed” to describe the introductory interest rate period.

Under the final advertising rule, what must accompany the use of the term “fixed” for a variable-rate transaction?
- A) A disclosure that the lender reserves the right to modify underwriting standards
- B) A complete future payment schedule for the entire loan term
- C) A statement explaining only the initial note rate
- D) A prominent statement describing the fixed period and the fact that the rate or payment may increase afterward
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Question 5 of 6

5. Question
A lender advertises a traditional 30-year fixed-rate mortgage in which both the interest rate and payment remain unchanged for the full term of the loan.

Under the final advertising rule, is this use of the word “fixed” generally permitted?
- A) No, because the word “fixed” may never appear in mortgage advertising
- B) Yes, because the rate and payment remain unchanged over the full term of the loan
- C) No, because all fixed-rate advertisements must also disclose adjustable-rate alternatives
- D) Yes, but only if the advertisement contains no payment information
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Question 6 of 6

6. Question
A lender advertises a mortgage product containing a preferred-rate conversion feature that may later cause the payment or interest rate to increase.

Under the final advertising rule, when may the use of the term “fixed” still be appropriate?
- A) Only for adjustable-rate mortgages with teaser rates
- B) Only when future payment changes are completely prohibited
- C) When payment or rate increases may occur solely because of a preferred-rate or fixed-rate conversion feature
- D) Only when the loan term is shorter than 15 years
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