NMLS Updated MLO Exam Questions and Answers by reece

Under TILA’s right of rescission, when there are multiple borrowers with an ownership interest in the property, each owner must receive notice of the right to rescind. If any one of them exercises the right, the loan is rescinded.

“When more than one consumer has the right to rescind, the exercise of the right by one consumer is effective as to all.”

— 12 CFR § 1026.23(a)(4), Regulation Z

According to RESPA (Regulation X), a borrower generally has the right to choose their own settlement service providers. However, the appraiser is selected by the lender (not the borrower), and the borrower is required to use the appraiser chosen by the lender to ensure appraisal independence and lender risk management.

“A lender may require the use of a particular appraiser to perform the appraisal for a loan.”

— RESPA, 12 CFR § 1024.2(b); Appraiser Independence Requirements

Under TILA, the term finance charge includes any fees related to the cost of borrowing, such as daily or per diem interest paid by the borrower. The finance charge encompasses all charges imposed by the creditor as a condition of extending credit, including interest, points, and loan origination fees.

Seller's points (B) are not part of the finance charge because they are paid by the seller.

Standard application fees (C) and document preparation fees (D) are typically excluded unless they are specifically tied to the cost of obtaining credit.

When there is no tax return history for a rental property, FHA guidelines require lenders to reduce the gross rental income by 25% to account for vacancies and maintenance.

“If there is no history of rental income on the borrower’s tax returns, the lender must reduce the market rent by 25% before considering it as effective income.”

— HUD 4000.1 FHA Single Family Housing Policy Handbook