Section 1 Lesson 2

A mortgage broker meets with borrowers, gathers financial information, and regularly refers applicants to specific wholesale lenders that will evaluate whether to extend mortgage credit. During a fair lending review, regulators question whether the broker qualifies as a “creditor” under Regulation B for certain ECOA provisions.

Which statement correctly reflects the definition of “creditor” under Regulation B?

Exam-style ECOA prohibited basis scenario involving Race.
Which prohibited basis or ECOA principle applies?

A mortgage company gives loan officers discretion when setting pricing adjustments. An internal audit later reveals that applicants with darker skin tones consistently received higher rates and fees than similarly qualified applicants within the same ethnic group.

Which prohibited basis applies in this situation?

A borrower applies for a mortgage loan and fully qualifies under the lender’s underwriting guidelines. After learning the borrower belongs to a particular religious group, management instructs the underwriter to deny the application due to community concerns.

Which prohibited basis under ECOA applies?

An applicant who recently immigrated to the United States applies for a mortgage loan with excellent credit, stable employment, and sufficient assets. Although the applicant satisfies all lending requirements, the file is denied after management expresses concerns about the applicant’s foreign background.

Which prohibited basis applies?

Exam-style ECOA prohibited basis scenario involving Sex.
Which prohibited basis or ECOA principle applies?

Exam-style ECOA prohibited basis scenario involving Marital Status.
Which prohibited basis or ECOA principle applies?

A 72-year-old borrower with strong credit, stable retirement income, and full legal capacity applies for a refinance loan. The lender denies the application solely because management prefers not to make loans to older applicants.

Which prohibited basis applies?

A borrower applies for a mortgage loan using documented Social Security disability income and housing assistance benefits. Although the income is stable and verifiable, the underwriter refuses to consider it when evaluating repayment ability.

Which prohibited basis applies?

A borrower previously filed a valid Truth-in-Lending complaint against a lender. One year later, the borrower applies for another mortgage loan and is denied after management references the prior complaint during the underwriting review.

Which prohibited basis applies?

Exam-style ECOA prohibited basis scenario involving Characteristics of Future Tenants.
Which prohibited basis or ECOA principle applies?

Exam-style ECOA prohibited basis scenario involving Neighborhood Characteristics.
Which prohibited basis or ECOA principle applies?

A same-sex couple was legally married in a state that recognizes same-sex marriage. They later move to another state where local law does not recognize that marriage. The couple applies jointly for a mortgage loan, but the lender refuses to treat them as married for purposes of CFPB-administered regulations.

Which statement best reflects CFPB guidance?

A lender receives a joint mortgage application from two legally married same-sex spouses. The loan officer states that because the applicants married in another state, the lender will not process the file as a married-couple application.

During an ECOA review, regulators examine whether the lender properly applied CFPB guidance.

Which statement is correct?

A prospective applicant calls a lender to ask about mortgage options. During the call, the loan officer says the company does not usually approve applicants like you after learning information related to a prohibited basis. The applicant decides not to apply.

Which ECOA rule is most directly implicated?

A borrower contacts a lender and follows the lender’s established procedure for requesting mortgage credit. The borrower makes the request verbally over the telephone. The lender claims ECOA application rules do not apply because nothing was submitted in writing.

Which statement best reflects the Regulation B definition of an application?

A consumer asks a lender what credit score, debt-to-income ratio, and loan-to-value standards are generally required to qualify for a mortgage. The consumer does not provide personal financial information or request a credit decision.

Which statement best describes this interaction under Regulation B?

A prospective borrower contacts a lender to ask general questions about mortgage qualification standards. During the conversation, the borrower later provides detailed information regarding income, assets, liabilities, and credit history so the loan officer can evaluate eligibility for a specific loan program.

Under Regulation B, when does the inquiry become an application?

A borrower contacts a mortgage lender and discusses obtaining financing but never submits the requested documentation or completes the formal application process. More than 30 days pass after the initial contact without further communication from the borrower.

How should the lender generally report the file for HMDA purposes?

A loan officer asks all applicants to identify their race and national origin during the initial mortgage interview, even though the loan program is not a government monitoring or special purpose credit program.

Which ECOA restriction applies?

A mortgage lender redesigns its application forms and requires all applicants to identify themselves as Mr., Mrs., Miss, or Ms. before the application may be processed.

During a fair lending review, regulators determine the form violates Regulation B requirements.

Which statement best reflects ECOA rules regarding sex designation requests?

During a mortgage interview, a lender asks applicants to disclose their religious affiliation and ethnic background as part of the underwriting process for a standard conventional loan program.

Which ECOA restriction most directly applies?

During a loan interview, a lender asks all applicants whether they know of any reason their income may decrease or become interrupted in the future. One applicant responds that she expects to take maternity leave later in the year.

Under ECOA, which action is permissible for the creditor?

A mortgage applicant provides financial information during a loan interview. The underwriter asks how many dependents live in the household and requests information regarding monthly child-care expenses and other dependent-related obligations.

Which statement best reflects ECOA requirements?

A loan officer requests information about alimony and child support income during a mortgage application interview. However, the officer fails to advise the borrower that disclosure of such income is optional if the applicant does not want it considered for qualification purposes.

Which ECOA requirement applies?

A creditor processing a mortgage application secured by real property asks the applicant to identify marital status. The application form provides the options single, married, divorced, and widowed.

During a compliance examination, regulators determine the form violates Regulation B.

Which statement best reflects ECOA marital-status requirements?

During a mortgage interview, a loan officer asks the borrower, Have you ever been divorced? before discussing loan qualification requirements.

Which statement best reflects ECOA guidance?

A borrower applies individually for a mortgage loan and does not rely on the spouse’s income or assets for qualification. The property is not located in a community property state, and the spouse will not be contractually liable on the loan.

Under ECOA, which statement is correct?

A married borrower applies for a mortgage loan and intends to rely on the spouse’s income to qualify for the requested loan amount.

Under ECOA, which action is permissible for the creditor?

A borrower applying for a mortgage loan receives Social Security disability income, rental assistance benefits, and Supplemental Security Income. During underwriting, a new loan processor questions whether these benefits qualify as income from a public assistance program under ECOA.

Which statement best reflects the Regulation B definition of a public assistance program?

A lender denies a mortgage application because the borrower does not maintain a landline telephone listing in the applicant’s own name. During a fair lending review, regulators determine the lender improperly considered prohibited information.

Which ECOA principle applies?

A borrower applies for a mortgage loan using part-time employment income and retirement pension income. The underwriter refuses to consider either source because management believes only full-time employment income should be used for qualification.

Which ECOA rule most directly applies?

A borrower relies on court-ordered child support income to qualify for a mortgage loan. The underwriter reviews the payment history and supporting documentation to determine whether the income is likely to continue.

Under ECOA, which action is permissible?

A lender evaluates whether a borrower’s alimony income is likely to continue for mortgage qualification purposes. The underwriter reviews a written divorce decree, payment history, and the payer’s credit profile before making a final determination.

Which ECOA principle permits this review?

A mortgage applicant has several jointly held accounts and a prior auto loan for which the borrower was contractually liable. During underwriting, the creditor reviews all repayment histories associated with those accounts.

Which statement best reflects ECOA requirements regarding credit history evaluation?

A non-citizen borrower applies for a mortgage loan. During underwriting, the lender reviews documentation regarding the borrower’s permanent residency and immigration status.

Which ECOA principle allows the creditor to consider this information?

A lender evaluates a mortgage application involving property located in a state with community property laws that may affect ownership rights and repayment obligations.

Which statement best reflects ECOA treatment of state property laws?

A married borrower applies individually for a mortgage loan and independently qualifies under the lender’s underwriting standards based solely on personal income, assets, and credit history. The lender nevertheless requires the borrower’s spouse to sign the promissory note as an additional obligor.

During a Regulation B examination, regulators review whether the lender improperly required an additional signature.

Which statement best reflects ECOA requirements?

A lender approves a mortgage loan secured by jointly owned real property. Although only one spouse applies for the loan, the lender requires the non-applicant spouse to sign documents necessary to create a valid lien and waive certain property rights associated with the collateral.

Under Regulation B, which action is permissible?

A borrower does not independently qualify for the requested mortgage loan under the lender’s underwriting standards. The creditor informs the borrower that an additional creditworthy party will be required to support the loan request.

Which statement best reflects ECOA requirements regarding co-borrowers and co-guarantors?

A borrower applies individually for mortgage credit but relies on income earned by another individual to qualify for the requested loan amount. The lender requires the individual providing the income to sign documentation making the income available for repayment purposes.

Which statement best reflects Regulation B requirements?

A borrower applying individually for mortgage credit chooses a close relative rather than a spouse to act as a co-guarantor. The lender refuses and states that only spouses may serve as acceptable co-guarantors under company policy.

During a fair lending review, regulators examine whether the lender violated Regulation B.

Which statement is correct?

A married applicant requests that the mortgage loan documents be issued using a birth-given first name and a combined surname that incorporates both the applicant’s birth surname and spouse’s surname.

Which statement best reflects ECOA requirements regarding names used on credit instruments?

A borrower applies for a 30-year fixed-rate mortgage at a specific interest rate and loan amount. After reviewing the file, the lender determines the borrower qualifies only under different loan terms with a higher interest rate and lower loan amount.

Under ECOA, which action should the lender generally take?

A lender issues a written counteroffer to a mortgage applicant after determining the borrower qualifies only under modified loan terms. The lender requests that the borrower indicate acceptance of the revised terms.

Which ECOA guideline applies?

A borrower receives a written counteroffer from a lender but never accepts the revised loan terms. More than 90 business days pass without borrower acceptance.

According to ECOA procedures, which action should generally follow?

A lender reviewing a mortgage application determines that several required financial documents are missing. The underwriter informs the borrower that the loan cannot be processed further until the additional information is received.

Which ECOA document should the lender generally provide?

A lender sends a Notice of Incompleteness to a borrower requesting additional income documentation and bank statements needed to continue processing the mortgage application.

Under ECOA guidelines, what additional information should generally be included in the notice?

A borrower receives a Notice of Incompleteness requesting additional documentation needed to process a mortgage application. The borrower fails to provide the requested information within the allotted timeframe.

Which action should the lender generally take?

A mortgage applicant applies for a first-lien residential loan. During the application process, the lender provides a disclosure informing the borrower of the right to receive copies of appraisals and other written valuations developed in connection with the transaction.

Which federal rule established this requirement?

A lender orders a property appraisal during the underwriting process for a first-lien mortgage loan. Before the loan decision is made, the borrower withdraws the application. The lender believes the appraisal copy no longer needs to be provided because the loan was not completed.

Under the ECOA Valuations Rule, which statement is correct?

A lender argues that only formal appraisals fall under the ECOA Valuations Rule and therefore internal written property evaluations are exempt from disclosure requirements.

During a CFPB examination, regulators determine the lender incorrectly interpreted the rule.

Which statement best reflects the ECOA Valuations Rule?

A borrower applies for a $400,000 mortgage loan at a fixed interest rate. After reviewing the file, the lender declines the requested terms and instead offers a significantly smaller loan amount with a higher interest rate. The borrower refuses the revised terms.

Under ECOA, which statement best describes this situation?

A creditor reduces the available credit line on a borrower’s home equity account while leaving similarly situated borrowers unchanged. The reduction is not related to inactivity, delinquency, or default.

Which statement best reflects ECOA adverse action rules?

A borrower with an existing credit line requests an increase in available credit. After reviewing the request, the creditor declines to approve the increase.

Under ECOA, how is this action generally treated?

A borrower agrees in writing to modify the terms of an existing mortgage account, including a change in the repayment schedule and interest rate.

Under ECOA, which statement is correct?

A creditor suspends charging privileges on an account after repeated missed payments and ongoing delinquency under the account agreement.

Which statement best reflects ECOA treatment of this action?

A borrower requests financing for a type of loan product the creditor does not offer to any applicants.

Under ECOA, which statement is correct?

A consumer attempts to use a credit card at a retail location, but the transaction is declined because the card has been reported stolen.

Under ECOA, which statement best reflects Regulation B?

A lender denies a mortgage application and issues an adverse action notice. The notice identifies the creditor and states the application was denied but does not explain the specific reasons for the denial or advise the borrower of the right to request them.

During a compliance review, regulators determine the notice violates Regulation B.

Which statement best reflects ECOA adverse action notice requirements?

A creditor receives a completed mortgage application and determines the borrower does not qualify under the lender’s underwriting standards. The lender decides to deny the application.

Under ECOA, within what timeframe must the creditor generally mail a written adverse action notice?

A lender sends a borrower a Notice of Incompleteness requesting additional income documentation needed to process a mortgage application. The borrower fails to provide the requested information by the deadline established in the notice.

Under ECOA, when must the lender generally mail the adverse action notice?

A creditor takes unfavorable action on an existing borrower account by reducing available credit due to circumstances permitted under the account agreement.

Under ECOA, what notification requirement generally applies?

A borrower applies for credit by telephone. During the call, the creditor declines the request and attempts to obtain the applicant’s mailing address in order to provide the required adverse action notice. The applicant refuses to provide a name or address.

Under ECOA, which statement is correct?

A lender provides a mortgage applicant with a written counteroffer after determining the borrower qualifies only under modified loan terms. The borrower neither accepts nor uses the offered credit.

Under ECOA, when must the lender generally provide the written adverse action notice?

A lender sends a borrower a Notice of Incompleteness requesting additional documentation needed to process a mortgage application. During a compliance audit, regulators review whether the notice contained the required information.

Which statement best reflects ECOA Notice of Incompleteness requirements?

A creditor receives an incomplete mortgage application missing income documentation and bank statements. The lender plans to issue a Notice of Incompleteness requesting the missing information.

Under ECOA, within what timeframe must the lender generally mail the notice?

A borrower fails to provide the additional documentation requested in a Notice of Incompleteness by the stated deadline.

Under ECOA, what notification requirement generally applies?

A lender issues a written counteroffer after determining a borrower qualifies only under modified mortgage loan terms. During a regulatory review, examiners evaluate whether the counteroffer notice included the required disclosures.

Which statement best reflects ECOA counteroffer notice requirements?

A creditor receives a completed mortgage application and determines the borrower qualifies only under revised loan terms. The lender prepares a written counteroffer notice.

Under ECOA, within what timeframe must the written counteroffer generally be mailed?

A lender issues a written counteroffer to a borrower, but the borrower neither accepts nor uses the credit offered under the revised terms.

Under ECOA, what notification requirement generally applies?