1.0 Federal Mortgage-Related Laws SAFE MLO Practice Quiz

Q: When a lender establishes an escrow account at closing, RESPA requires an itemized statement showing the monthly escrow payment, projected disbursements, and any cushion. The deadline for delivery is set by Regulation X. The initial escrow account statement must be delivered no later than:

45 days after the escrow account is established.

72 exam-style questions covering 24% of the SAFE MLO exam. Instant feedback on every answer, progress tracking, no signup required.

This domain is part of the NMLS Mortgage Loan Originator (MLO) practice test. Each question is tagged by exam objective and difficulty so you can drill exactly the areas you need.

Sample Questions

RESPA was enacted by Congress in 1974 to address rising costs in real estate transactions. Lenders, brokers, and servicers must comply with its disclosure and anti-kickback provisions. What is the primary purpose of RESPA?

A. To provide consumers disclosures about settlement costs and to prohibit kickbacks that increase those costs
B. To set maximum interest rates that lenders may charge on residential mortgages
C. To require lenders to make loans available in all geographic areas regardless of risk
D. To regulate the secondary mortgage market and securitization of mortgage-backed securities

Correct, RESPA's stated purpose under 12 USC 2601 is to give consumers settlement-cost disclosures and to eliminate kickbacks and unearned fees that inflate those costs.

Under Regulation X, classification as a mortgage broker matters because RESPA's anti-kickback rules attach to settlement service providers. The definition draws a line around persons who arrange but do not fund the loan. Under RESPA, a 'mortgage broker' is best defined as:

A. Any title agent who arranges financing as part of closing services
B. Any individual employed by a depository institution to take loan applications
C. A person, other than an employee of a lender, who renders origination services and serves as an intermediary between a borrower and a lender
D. A person whose only role is processing approved loan files for a single lender

Correct. Regulation X defines a mortgage broker as a person, other than an employee of the lender, who renders origination services and acts as an intermediary between borrower and lender.

RESPA applies to federally related mortgage loans on residential property. Whether RESPA disclosures and prohibitions apply depends on the property type and loan purpose. RESPA generally applies to a loan secured by:

A. Commercial real estate of any type, regardless of borrower
B. One- to four-family residential real estate where the loan is federally related
C. Vacant land of more than 25 acres held for development
D. A loan extended exclusively for business or agricultural purposes

Correct. Regulation X applies to federally related mortgage loans secured by 1-4 family residential real property.

When a lender establishes an escrow account at closing, RESPA requires an itemized statement showing the monthly escrow payment, projected disbursements, and any cushion. The deadline for delivery is set by Regulation X. The initial escrow account statement must be delivered no later than:

A. 30 days after consummation, regardless of when the escrow account is established
B. 45 days after the escrow account is established
C. The first scheduled mortgage payment date on the loan
D. The date of consummation, alongside the Closing Disclosure

Correct, 12 CFR 1024.17(g) requires the initial escrow account statement within 45 days of establishment of the account.

RESPA Section 9 protects a buyer's right to choose the title insurer in a residential purchase. The protection limits what a seller can demand as a sale condition. Section 9 of RESPA prohibits a seller from:

A. Requiring, as a condition of sale, that the buyer purchase title insurance from a particular company
B. Paying any portion of the buyer's title insurance premium at closing
C. Negotiating the property sales price with the buyer's lender
D. Recommending any settlement service provider to the buyer

Correct, 12 USC 2608 makes it unlawful for a seller to require, as a condition of sale, that the buyer use a specified title insurer.

Regulation X caps how much a lender may collect and hold in an escrow account beyond projected disbursements. The cushion absorbs disbursement variances without overcharging the borrower. The maximum escrow cushion permitted under Section 10 of RESPA is:

A. Equal to one full year of escrow disbursements
B. One-twelfth of the total annual escrow disbursements
C. An amount the loan contract specifies, with no federal cap
D. One-sixth of the total annual escrow disbursements, equal to two months of escrow payments

Correct, 12 CFR 1024.17(c)(1) caps the cushion at one-sixth of annual disbursements (about two months).

When loan servicing is transferred, both the transferor and the transferee servicer have notice obligations to the borrower. The notice tells the borrower where to send future payments and who to contact about the loan. The transferor servicer must send notice of a servicing transfer to the borrower:

A. At least 15 days before the effective date of transfer
B. Within 30 days after the effective date of transfer
C. At least 60 days before the effective date of transfer
D. Only if the borrower asks for the information in writing

Correct, 12 CFR 1024.33(b)(3) requires the transferor to provide notice at least 15 days before the effective date of transfer.

Regulation X imposes pre-foreclosure restrictions on servicers of mortgage loans secured by a borrower's principal residence. The rule limits when the first foreclosure-related filing may occur. A servicer generally may not make the first notice or filing required for foreclosure unless the borrower's mortgage obligation is more than:

A. 30 days delinquent and unresponsive to early-intervention contact
B. 60 days delinquent
C. 120 days delinquent
D. 180 days delinquent

Correct, 12 CFR 1024.41(f) generally bars the first foreclosure notice or filing until the borrower is more than 120 days delinquent.

Key Terms in This Domain

RESPA / Reg X (12 CFR 1024): Real Estate Settlement Procedures Act: settlement-cost disclosure, anti-kickback (Section 8), escrow accounting (Section 10), servicer transfer notices, force-placed insurance
Servicing disclosure / transfer notice: RESPA requires Servicing Disclosure Statement at application; Goodbye/Hello letters for transfer (15 days before / 15 days after)
Valuation copy rule: Reg B §1002.14: must provide all written appraisals and valuations promptly upon completion or 3 business days before consummation
Dodd-Frank Act (2010): Created CFPB; established UDAAP standard; mandated ATR/QM, LO comp, HOEPA expansion, escrow rules; Title XIV restructured mortgage regulation
Affiliated business arrangement (AfBA): RESPA Section 8(c)(4) safe harbor: written disclosure of the relationship + estimated charges, no required use, only return on ownership interest paid
RESPA Section 10 escrow limit: Annual escrow account analysis; cushion limited to 1/6 of estimated annual disbursements (≈ 2 months)
HPML (12 CFR 1026.35): Higher-Priced Mortgage Loan: APR ≥ APOR + 1.5% (first-lien conforming); requires escrow for ≥5 years and stricter appraisal
TRID: Loan Estimate timing: 3 business days from application; "application" triggered by 6 items: name, SSN, income, address, estimated value, loan amount
TRID: Closing Disclosure timing: Provided at least 3 business days before consummation; rate change ≥ 1/8% (fixed) or 1/4% (ARM) triggers a new 3-day waiting period
Special Information Booklet: "Your Home Loan Toolkit": provided to applicant within 3 business days of application for purchase loans

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Last updated: May 8, 2026

1.0 Federal Mortgage-Related Laws SAFE MLO Practice Quiz

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Key Terms in This Domain

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