NMLS Quiz: Apply Tila Disclosure Rules
20 questions · exam conditions
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Apply Tila Disclosure RulesQuestion 1 of 20

Which of the following fees is excluded from the finance charge under TILA?

Origination fees charged by the lender
Credit report fees exceeding actual costs
Required appraisal fees paid to lender
Property survey fees required by lender
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NMLS Quiz

NMLS Quiz: Apply Tila Disclosure Rules

Practice Apply Tila Disclosure Rules in NMLS with focused quiz questions that help you check what you know, review explanations, and build confidence with test-style prompts.

What this quiz covers

This quiz focuses on Apply Tila Disclosure Rules, giving you a quick way to practice the rules, question types, and explanations that matter most for NMLS.

How to use this quiz

Try each quiz question before looking at the correct answer. Use the explanations to review missed ideas, then come back to similar questions until the pattern feels familiar.

All questions

Question 1

Which of the following fees is excluded from the finance charge under TILA?

  1. Origination fees charged by the lender
  2. Credit report fees exceeding actual costs
  3. Required appraisal fees paid to lender
  4. Property survey fees required by lender (correct answer)
Explanation: Under TILA, property survey fees are excluded from the finance charge even when required by the lender, as they are considered necessary transaction costs. Origination fees are always included in finance charges. Credit report fees are included when they exceed actual costs incurred by the lender. Appraisal fees are generally excluded from finance charges when paid to third parties.

Question 2

Under TILA, the finance charge includes all of the following EXCEPT:

  1. Mortgage insurance premiums required by the lender for loan approval
  2. Attorney fees for document preparation charged by the lender
  3. Notary fees required for loan document execution and recording (correct answer)
  4. Credit life insurance premiums when required as loan condition
Explanation: Under TILA, notary fees are excluded from finance charges as they are considered necessary transaction costs rather than charges for obtaining credit. Mortgage insurance premiums are included when required by the lender. Attorney fees charged by the lender are included in finance charges. Credit life insurance premiums are included when required for loan approval.

Question 3

An advertisement states 'Refinance for just $1,200 per month!' What must be disclosed under TILA advertising rules?

  1. Only the APR corresponding to the payment amount
  2. The loan amount, APR, down payment, and repayment terms (correct answer)
  3. No additional disclosures since this is a general example
  4. Only a disclaimer about varying rates and payments
Explanation: Under TILA Regulation Z, when a specific payment amount is advertised, all material loan terms must be disclosed including loan amount, APR, down payment (if any), and repayment terms. APR alone is insufficient. Payment examples are not exempt from disclosure requirements. General disclaimers do not satisfy specific TILA disclosure requirements.

Question 4

An adjustable-rate mortgage advertisement must include which disclosure under TILA advertising rules?

  1. The maximum possible interest rate increase over the loan term
  2. The specific index and margin used for rate adjustments
  3. A statement that the rate may increase and the payment may vary (correct answer)
  4. Historical performance data for the underlying rate adjustment index
Explanation: Under TILA advertising rules for ARMs, advertisements must include a statement that the rate may increase and payments may vary. The maximum rate disclosure is not required in advertising. Specific index and margin details are not required in advertising. Historical index performance is not required to be disclosed in ARM advertisements.

Question 5

A mortgage lender advertises: 'Get pre-approved today! Rates from 3.25% to 4.75% depending on loan program and credit score. Call now for your personalized rate quote!'

This advertisement complies with TILA advertising rules because it:

  1. Provides a complete range of available rates for different credit profiles
  2. Does not state specific payment amounts that would trigger additional disclosures (correct answer)
  3. Includes appropriate disclaimers about rate availability and loan programs
  4. Directs consumers to contact the lender for personalized rate information
Explanation: This advertisement complies with TILA because it does not include specific payment amounts, down payments, or other triggering terms that would require comprehensive material term disclosures. Rate ranges alone do not trigger full disclosure requirements. Disclaimers and rate ranges are helpful but not the primary compliance factor. Directing consumers to call doesn't determine TILA compliance.

Question 6

A lender advertises: 'Purchase your dream home with payments starting at just $1,450 per month! 3.75% interest rate available to qualified borrowers with excellent credit!'

This advertisement violates TILA advertising rules because it fails to:

  1. Include a clear disclaimer about rate availability based on credit qualifications
  2. Disclose the corresponding APR with equal prominence to the interest rate
  3. Provide all material loan terms including loan amount and repayment schedule (correct answer)
  4. Specify the exact credit score requirements for the advertised rate availability
Explanation: This advertisement violates TILA by including both a specific payment amount and interest rate without providing all required material terms (loan amount, APR, down payment, repayment terms). When payment amounts are advertised, comprehensive loan term disclosure is required. Credit disclaimers, while good practice, don't cure the missing material terms. Equal APR prominence is required but the missing material terms are the primary violation.

Question 7

A mortgage advertisement states 'Get a 3.5% rate!' What additional disclosure is required under TILA advertising rules?

  1. The advertisement must prominently display the corresponding APR alongside the rate (correct answer)
  2. No additional disclosures are required for simple interest rate advertisements
  3. The advertisement must include all material terms of the loan offer
  4. The advertisement must specify whether the rate applies to purchase or refinance loans
Explanation: Under TILA Regulation Z, when an interest rate is advertised, the corresponding APR must be disclosed with equal prominence. Simple rate advertisements do require APR disclosure. All material terms are required only when payment amounts or other triggering terms are advertised. Loan purpose specification is not required by TILA advertising rules.

Question 8

For TILA APR calculation purposes, which fee treatment is correct?

  1. FHA mortgage insurance premiums are excluded because they are government-required
  2. Flood insurance premiums are included when the property is in a flood zone
  3. VA funding fees are included because they are charges to obtain the credit (correct answer)
  4. Title insurance premiums are included when they exceed the state-regulated amount
Explanation: Under TILA, VA funding fees are included in finance charges and APR calculations because they are charges imposed to obtain credit, even though they are government fees. FHA mortgage insurance premiums are actually included, not excluded. Flood insurance is excluded regardless of property location. Title insurance premiums are generally excluded regardless of amount.

Question 9

On a refinance, which fees count toward finance charge under TILA: $2,800.00 origination, $650.00 appraisal, $1,200.00 title, $900.00 escrow?

  1. Origination and interest only; appraisal and title never count
  2. All listed fees count because they are paid at closing
  3. Origination counts; escrow deposit does not; appraisal/title depend on exclusions (correct answer)
  4. Escrow deposit counts; origination does not if lender-paid
Explanation: This question tests the application of TILA disclosure rules in calculating and interpreting APR, finance charges, and advertising compliance. The APR represents the annual cost of a loan including fees, providing a broader measure than the interest rate alone. In this specific scenario, fees like origination count as finance charges, while escrow deposits do not, and appraisal/title may be excluded if bona fide and reasonable. Choice C is correct because it accurately applies TILA principles to identify which fees qualify as finance charges. Choice A is incorrect due to a common misconception that certain third-party fees never count, ignoring TILA exclusions. To help students: Emphasize the importance of distinguishing between APR and nominal rates, teach the breakdown of finance charges, and provide examples of compliant advertisements under TILA. Encourage reviewing Reg Z for specific fee exclusions.

Question 10

For TILA finance charge calculation, credit report fees are:

  1. Always excluded regardless of the amount charged to the borrower
  2. Included only when they exceed the actual cost to obtain the report (correct answer)
  3. Always included as they are necessary charges to evaluate creditworthiness
  4. Excluded only when paid directly by the borrower to the credit agency
Explanation: Under TILA, credit report fees are included in finance charges only when the amount charged to the borrower exceeds the actual cost incurred by the creditor to obtain the report. They are not automatically excluded or included. The payment method (direct or indirect) does not determine inclusion in finance charges.

Question 11

For APR calculation purposes under TILA, discount points paid by the borrower are:

  1. Excluded from finance charges because they represent prepaid interest amounts
  2. Included in finance charges because they are fees paid to obtain credit (correct answer)
  3. Excluded from finance charges when paid directly to third-party providers
  4. Included in finance charges only when they exceed two percent of loan amount
Explanation: Under TILA, discount points paid by the borrower are included in finance charges because they are fees paid to obtain the credit, regardless of being prepaid interest. They are not excluded simply because they represent prepaid interest. Payment to third parties doesn't exclude points from finance charges. There is no percentage threshold that determines inclusion in finance charges.

Question 12

For TILA disclosure purposes, mortgage insurance premiums are:

  1. Excluded from finance charges when required by government loan programs
  2. Included in finance charges when required by the lender as loan condition (correct answer)
  3. Excluded from finance charges when they benefit only the borrower's interests
  4. Included in finance charges only when they exceed industry standard amounts
Explanation: Under TILA, mortgage insurance premiums are included in finance charges when required by the lender as a condition of obtaining the loan, regardless of whether they are government or private programs. Government program requirements do not exclude them from finance charges. The beneficiary of the insurance does not determine inclusion. There is no industry standard threshold for inclusion in finance charges.

Question 13

Under TILA, which of the following is included in the finance charge calculation for APR purposes?

  1. Hazard insurance premiums required by the lender
  2. Mortgage broker fees paid by the borrower (correct answer)
  3. Title insurance premiums paid to third parties
  4. Property taxes in initial escrow deposits
Explanation: Under TILA Regulation Z, mortgage broker fees paid by the borrower are included in the finance charge and APR calculation. Hazard insurance premiums are excluded from finance charges even when required by the lender. Title insurance premiums paid to third parties are excluded from finance charges. Property taxes are excluded as they are not charges imposed by the creditor for obtaining credit.

Question 14

Under TILA advertising rules, which statement about rate advertisements is accurate?

  1. Interest rates may be advertised alone without any additional disclosure requirements
  2. APR must be disclosed with greater prominence than the advertised interest rate
  3. APR must be disclosed with equal prominence when interest rates are advertised (correct answer)
  4. Interest rate advertisements require disclosure of all material loan terms
Explanation: Under TILA Regulation Z, when interest rates are advertised, the corresponding APR must be disclosed with equal prominence, not greater prominence. Interest rates cannot be advertised without APR disclosure. Material loan term disclosure is required only when payment amounts or other triggering terms are advertised, not for simple rate advertisements.

Question 15

A mortgage company's website displays: 'Home Loans Available - Competitive rates and flexible terms! Monthly payments as low as $899 for qualified borrowers. Equal Housing Opportunity Lender.'

This advertisement violates TILA disclosure rules because it:

  1. Fails to specify the exact interest rates available to different borrower categories
  2. Does not disclose loan amount, APR, down payment, and repayment terms (correct answer)
  3. Lacks specific information about borrower qualification requirements and standards
  4. Does not include required disclaimers about rate and payment variability
Explanation: Under TILA advertising rules, when specific payment amounts are advertised ('as low as $899'), all material loan terms must be disclosed including loan amount, APR, down payment, and complete repayment terms. Specific rate disclosure is not required for payment advertisements. Qualification requirements are not mandated by TILA. General disclaimers do not substitute for required material term disclosures.

Question 16

Under TILA disclosure rules, which statement about APR accuracy is correct?

  1. APR must be accurate within 0.125 percentage points for all mortgage loans (correct answer)
  2. APR must be accurate within 0.25 percentage points for regular mortgage transactions
  3. APR accuracy tolerance is 0.5 percentage points for loans over $100,000
  4. APR accuracy requirements vary based on the borrower's creditworthiness
Explanation: Under TILA Regulation Z, APR must be accurate within 0.125 percentage points (1/8th percent) for mortgage loans. The 0.25 percentage point tolerance applies to other types of credit, not mortgages. There is no different tolerance for larger loan amounts. APR accuracy requirements are not based on borrower creditworthiness but on loan type.

Question 17

A borrower is obtaining a $300,000 mortgage loan. The lender charges a 1% origination fee, the borrower pays 1.5 discount points, and there is a $500 processing fee. The borrower also pays $400 for an appraisal to a third-party appraiser.

What is the total amount included in the finance charge for this loan?

  1. $7,900 including all charges
  2. $7,500 excluding appraisal fee (correct answer)
  3. $4,500 points and origination only
  4. $8,400 including all costs
Explanation: Finance charges include: origination fee (1% × $300,000 = $3,000), discount points (1.5% × $300,000 = 4,500),andprocessingfee(4,500), and processing fee (500) = 7,500total.Thethird−partyappraisalfee(7,500 total. The third-party appraisal fee (400) is excluded from finance charges under TILA, even when required by the lender.

Question 18

A borrower obtains a $250,000 loan with the following costs: 1.5% origination fee, $450 processing fee, $350 credit report fee (actual cost $25), and $500 appraisal fee paid to an independent appraiser.

What amount should be included in the finance charge calculation?

  1. $4,625 including origination fee, processing fee, and excess credit report charges (correct answer)
  2. $4,300 including origination fee and processing fee but excluding credit report excess
  3. $5,125 including all lender charges plus the independent third-party appraisal fee
  4. $3,750 including only the origination fee charged by the primary lending institution
Explanation: Finance charge includes: origination fee (3,750),processingfee(3,750), processing fee (450), and excess credit report fee ($325 excess over $25 actual cost) = $4,625. The independent appraisal fee is excluded from finance charges under TILA. Only the excess portion of the credit report fee above actual cost is included as a finance charge.

Question 19

A mortgage advertisement states 'No points, no fees!' To comply with TILA advertising rules, this claim:

  1. Is automatically compliant if the lender charges no origination points or fees
  2. Must be substantiated and may not be misleading about actual loan costs (correct answer)
  3. Requires disclosure of all fees that are rolled into the interest rate instead
  4. Is prohibited under TILA as it constitutes an unfair advertising practice
Explanation: Under TILA advertising rules, 'no points, no fees' claims must be substantiated and not misleading. If some costs are shifted to higher rates or other fees, the claim could be deceptive. Automatic compliance based on literal truth is insufficient if the overall impression is misleading. Disclosure of rate-embedded costs is good practice but not specifically required. Such claims are not automatically prohibited if properly substantiated.

Question 20

Under TILA, which fee is properly excluded from the APR calculation?

  1. Underwriting fees charged by the lender for loan processing and approval
  2. Wire transfer fees for sending loan proceeds to the closing agent (correct answer)
  3. Document preparation fees charged by the lender's attorney
  4. Application fees paid to the lender at the time of loan submission
Explanation: Under TILA, wire transfer fees are excluded from finance charges as they are charges for methods of payment, not charges for obtaining credit. Underwriting fees charged by the lender are included in finance charges. Document preparation fees by lender's attorney are included. Application fees paid to the lender are included in finance charges.