Ethics · 18% of the SAFE exammedium
Correct answer: Prepayment penalties on QM loans may not extend beyond 3 years, are capped at 2% in years 1-2 and 1% in year 3, and are only permitted on fixed-rate or step-rate QMs — not adjustable-rate QMs
Under Dodd-Frank's QM rules (Regulation Z, 12 CFR 1026.43(g)), prepayment penalties on Qualified Mortgages are subject to three key restrictions: (1) They may not extend beyond 3 years from consummation; (2) They are capped at 2% of the outstanding loan balance in years 1 and 2, and 1% in year 3; (3) They are only permitted on fixed-rate or step-rate QMs — adjustable-rate QMs may never have prepayment penalties. "Prepayment penalties on QM loans may not extend beyo..." incorrectly states a 5-year period and 5% cap. "Prepayment penalties are permitted on all QM loans r..." is incorrect — prepayment penalties are not entirely prohibited; they are restricted to specific loan types and capped amounts. "Prepayment penalties are completely prohibited on al..." is incorrect because adjustable-rate QMs are categorically prohibited from having prepayment penalties, and mere disclosure does not make a prepayment penalty permissible on a non-qualifying loan type.
CRAM ARCADE has the full NMLS question bank, timed practice exams, focus drills on your weakest category, flashcards and spaced repetition. No credit card.
Start studying free